Morgan Stanley cuts oil forecast again as concerns deepen

(Bloomberg) — Morgan Stanley reduced its Brent ( BZ=F ) crude price forecasts for the second time in a matter of weeks, as demand challenges mount while supplies remain plentiful.

The global benchmark will average $75 a barrel in the fourth quarter, according to a note from analysts including Martijn Rats. That compares with an earlier projection of $80 between October and December, which was issued just last month in a cut from the prior outlook for $85. Predictions for most of next year were also pared back slightly.

Brent recently tumbled to the lowest close since late 2021 as sustained concerns about weaker Chinese demand fused with signals that the US economy may be slowing. At the same time, output remains ample, forcing OPEC+ to defer a plan to relax its own production curbs.

“The recent trajectory of oil prices has similarities to other periods with considerable demand weakness,” Rats and his colleagues said in the report dated Sept. 9. Time spreads — price comparisons along the futures curve — indicated the coming of “recession-like inventory builds,” although it was too early to make this the bank’s base case, they said.

Morgan Stanley’s rethink about the outlook has been echoed by concerns at other leading banks. Goldman Sachs Group Inc. pared its view last month, while more recently Citigroup Inc. said the market looked oversupplied and prices could average $60 a barrel in 2025 unless OPEC+ cut deeper.

Brent — which sank almost 10% last week — traded near $72 a barrel on Monday, with major commodity trader Trafigura Group telling an industry conference in Singapore that the price was set to drop into the $60s in the near future.