Morgan Stanley has forecasted that the crude oil market, currently experiencing tight conditions, will likely move into surplus next year as the investment bank anticipates that oil prices will drop to the mid-to-high $70s range by 2025.
Morgan Stanley said that the tight market conditions are expected to persist for most of the third quarter. However, by the fourth quarter, the market is projected to reach equilibrium.
This shift is attributed to the waning of seasonal demand tailwinds and the anticipated growth in both OPEC and non-OPEC oil supplies.
Last week, Reuters reported that OPEC+ is unlikely to suggest changes to the group's current output policy at the upcoming mini-ministerial meeting next month. Such a decision would maintain the plan to begin reducing one layer of oil output cuts starting in October.
Morgan Stanley predicted that the supply from both OPEC and non-OPEC producers will increase by approximately 2.5 million barrels per day (bpd) by 2025, outpacing the expected growth in demand.
Refinery activity is projected to hit its peak in August this year. However, Morgan Stanley did not foresee refinery runs reaching similar levels until July 2025.
The bank has maintained its forecast for Brent oil prices in the third quarter of 2024 at $86 per barrel. This outlook aligns with Goldman Sachs, which earlier this month also projected an average Brent price of $86 per barrel for the same period.
As of Monday, Brent crude prices saw a slight increase of 0.54%, reaching $83.08 per barrel by 0535 GMT. Concurrently, US West Texas Intermediate (WTI) crude futures also rose by 0.54%, trading at $80.56 per barrel.