Oil market likely to have surplus next year, says Morgan Stanley

(Reuters) – The crude oil market is currently tight, but next year is likely to be in surplus, with Brent prices falling into the mid-to-upper $70 range, Morgan Stanley said.

The tightening will continue through most of the third quarter, the bank said in a note dated Friday, but balance will return in the fourth quarter, “when seasonal demand tailwinds subside and both OPEC supply and of non-OPEC countries to return to growth”.

Three sources told Reuters last week that OPEC+ is unlikely to recommend a change to the group’s production policy at a mini-ministerial meeting next month, leaving in place a plan to begin eliminating a layer of oil output cuts. from October.

Morgan Stanley said it expects OPEC and non-OPEC supply to grow by about 2.5 million barrels per day (bpd) in 2025, well ahead of demand growth.

Refinery operations are expected to peak in August this year and are unlikely to return to that level until July 2025, he said.

Morgan Stanley left its forecast for Brent oil prices unchanged for the third quarter of 2024, at $86 per barrel. Earlier this month, Goldman Sachs also maintained its projection for the quarter at an average Brent price of $86 per barrel.

Brent crude prices on Monday rose 0.54% to $83.08 a barrel by 05:35 GMT, and West Texas Intermediate crude futures rose 0.54% to $80.56. [O/R]

(Reporting by Daksh Grover and Ashitha Shivaprasad in Bengaluru; Editing by Tom Hogue)