With Oil Price Approaching $100, Morgan Stanley Says All Signals Flashing Tightness

Emmanuel Addeh in Abuja

With the price of oil soaring towards the $100 mark, Morgan Stanley has said in a note, that all signals for crude oil are ‘flashing tightness’ with prices being supported at current levels.

“Not only has Brent flat price risen, but calendar spreads have rallied, refining margins are unusually strong, the CFD curve is deeply in backwardation and physical differentials are elevated,” Morgan Stanley said.

According to the group, the fundamental data is telling “a similar story,” with robust demand growth and falling inventories.

It stated that the oil market is currently undersupplied by about 1 million barrels per day, with inventory suggesting an undersupply of 1.3 million bpd so far this quarter.

 The undersupply—coincidentally or not so coincidentally—pretty closely matches the volume of the Organisation of Petroleum Exporting Countries (OPEC) production declines this quarter compared to the 2nd quarter.

As Morgan Stanley pointed out, this curb in supply was almost entirely carried out by OPEC heavyweight Saudi Arabia.

As such, OPEC, and in particular Saudi Arabia, “are key” to the oil market outlook.

Morgan Stanly’s new Brent price forecast for Q4 this year is $95 per barrel—up from $82.50. Its outlook for Q1 2024 is for $92.50 per barrel, up from an estimate of $80 in its previous outlook.