Morgan Stanley expects tight supply to support oil prices

Morgan Stanley put forward a forecast about possible tension in the oil market during the third and fourth quarters of 2023. Such situation will be facilitated by recovery of demand after opening of borders in China.

The bank’s analytical note took relevant information about further possible tendencies in the market. The forecast published there was about reaching equilibrium in the market during Q2. Then the next reporting periods will show a tougher situation, which must support high prices. This scenario is based on several factors. Analysts noted that this market condition is indicated by the recent opening of China's borders, as well as the risk to further Russian export supplies. Decline in shale oil production in the U.S. and the cessation of oil sales from SPR also affected the overall outlook.

Despite the expected fixing of Brent prices in the $80-85 range during the first quarter, Morgan Stanley warned of a possible supply ceiling. As of today, supply remains already too low.

The bank predicts that China's oil demand will increase by 1 million barrels per day. This growth will increase gradually over the year.

Starting from February 5, the G7 coalition will impose price ceilings on Russian oil products. Morgan Stanley predicts disruption of Russian oil supplies in the volume of about 1 mln barrels per day due to price limits.