In response to ongoing production cuts by Saudi Arabia and Russia, Morgan Stanley has revised its Brent oil price predictions upward, suggesting that the oil market may face supply shortages for several quarters. However, the bank has cautioned that prices exceeding $100 per barrel could be considered excessive.
Morgan Stanley has adjusted its outlook, notably increasing its fourth-quarter Brent forecast from $82.5 per barrel to a robust $95. The bank has also raised its projections for the first quarter of 2024 to $92.5 per barrel, the second quarter to $90, the third quarter to $87.5, and the fourth quarter to $85.
As of Thursday, the global benchmark for Brent crude oil was hovering around $93 per barrel. The recent surge in oil prices comes after Saudi Arabia and Russia announced extended production cuts, resulting in oil prices reaching their highest levels in ten months.
In a note dated Wednesday, Morgan Stanley emphasized the significance of these production cuts, stating, “With these cuts, fundamentals are clearly tighter-for-longer and prices are well supported.” The bank believes that as long as the oil market remains in a deficit, current price levels will continue to find substantial support.
This outlook aligns with the sentiments expressed by Goldman Sachs, which, on Wednesday, projected that the Organization of the Petroleum Exporting Countries (OPEC) could sustain Brent crude prices within a range of $80 to $105 per barrel in 2024. Goldman Sachs cited growing oil demand and extended supply cuts as the driving forces behind their bullish prediction.
The combination of extended production cuts by major oil-producing nations and the enduring demand for oil has created an environment where oil prices are expected to remain robust in the foreseeable future. These developments in the oil market hold significant implications for both producers and consumers, underscoring the importance of monitoring global oil supply dynamics in the months ahead.