Morgan Stanley has once again reduced its Brent crude oil price forecasts, citing growing challenges in global demand while supplies remain abundant. This is the second downgrade in a matter of weeks, reflecting increasing uncertainty in the oil market.
Revised Brent Forecast for Q4
According to a note from analysts including Martijn Rats, Brent crude is now expected to average $75 per barrel in the fourth quarter of 2024. This is a downward revision from the previous forecast of $80, which was already cut from an earlier outlook of $85 just a month ago. The bank also made slight reductions in its predictions for Brent prices throughout 2025.
Factors Behind the Decline
The revised outlook follows a sharp decline in Brent prices, which recently hit their lowest level since late 2021. Concerns about weaker demand from China, combined with signs of a potential slowdown in the US economy, have driven prices downward. At the same time, global oil output remains plentiful, leading OPEC+ to delay plans to ease production curbs.
Parallels to Previous Demand Weakness
Morgan Stanley analysts noted that the current trajectory of oil prices shares similarities with previous periods of significant demand weakness. They pointed out that time spreads in the futures market—price comparisons along different points of the futures curve—indicate the possibility of “recession-like inventory builds.” However, the bank emphasized that it is still too early to make a recession scenario their base case.
Other Banks Follow Suit
Morgan Stanley’s more cautious outlook mirrors concerns from other major financial institutions. Goldman Sachs downgraded its oil price forecasts last month, and Citigroup recently predicted that the market appears oversupplied. Citigroup suggested that if OPEC+ does not implement deeper production cuts, prices could drop to an average of $60 per barrel by 2025.
Further Decline Expected
Brent crude traded near $72 per barrel on Monday, following a nearly 10% decline last week. Additionally, Trafigura Group, a major commodity trading firm, warned during an industry conference in Singapore that prices could soon fall into the $60 range.
Conclusion
As global demand struggles to keep pace with supply, oil prices are likely to remain under pressure. Morgan Stanley’s revised forecast signals that without stronger demand or further production cuts from OPEC+, the outlook for Brent crude remains bleak heading into the final quarter of the year.
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