The United States Oil Fund LP (USO) experienced a significant pre-market plunge of 5.36% on Monday, as investors reacted to Morgan Stanley's lowered Brent crude estimates for the year. The investment bank cited the twin headwinds of higher-than-expected trade tariffs and faster-than-expected OPEC+ quota increases as key factors weighing on oil prices in the coming months.

Morgan Stanley has revised its Brent crude forecasts downward, now expecting prices to reach $65 per barrel in the second quarter, down from the previous estimate of $70. For the third and fourth quarters, the bank projects Brent at $62.5 per barrel, a decrease from the earlier forecast of $67.5. This bearish outlook has likely contributed to the sharp decline in USO, which tracks the price of West Texas Intermediate (WTI) crude oil.

The bank's analysts also highlighted the potential impact of recent tariff announcements on global economic growth, estimating a reduction of around 550,000 barrels per day in oil demand. In a recession scenario, this impact could escalate to approximately 1 million barrels per day. Consequently, Morgan Stanley has lowered its oil demand growth projections for the current year from 900,000 to 700,000 barrels per day, with a further reduction to 500,000 barrels per day expected in 2026. These factors collectively paint a challenging picture for oil prices and oil-related securities in the near term.