Morgan Stanley on Wednesday joined other investment banks in concluding that the decision by OPEC+ this week to begin raising crude oil production on April 1 will depress prices.
Morgan reminded its clients that it had expected OPEC+ to extend its production cuts through the second quarter and possibly through the end of this year. It said it now appears the producer group plans to use the higher demand period of April through August as a test for the increased output.
The bank earlier projected the price of Brent crude would average $75/bbl in the first half of 2025 before slipping to $72.50/bbl in the third quarter and $70/bbl in the fourth quarter.
On Wednesday, however, it projected a Q2 average of $70/bbl and $67.50/bbl average price in the second half of the year.
The bank's report said tariffs and counter-tariffs have potential to weigh on oil-intensive parts of the global economy, creating demand uncertainty. It said its analysts had suspected the cartel would decide against releasing more supply "into a period of rising trade tensions," adding that Monday's OPEC+ decision was a surprise. Morgan's commodity analysts also said demand uncertainty "has arguably not diminished," given what appears to be a slowing global economy.
The bank earlier projected global oil demand would rise by about 1 million b/d this year - an estimate below the consensus view. It left that outlook unchanged, but said OPEC+'s decision will increase global crude supply by 200,000 b/d to 700,000 b/d over the last nine months of 2025.
That would move balances from neutral in the second half of the year to about a 500,000 b/d surplus.
The report, however, cautioned that OPEC+ officials could decide to reverse the supply increases later this year.
Morgan did maintain its $75/bbl Brent target in the first quarter. Brent has spent much of the last two days priced below $69/bbl.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
--Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com
(END) Dow Jones Newswires
March 06, 2025 14:08 ET (19:08 GMT)
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