Morgan Stanley has slashed its Brent crude price forecasts for the next 18 months, expecting a new supply glut to emerge as the Strait of Hormuz reopens. The bank now sees Dated Brent averaging $75 per barrel in the third quarter, a significant reduction from prior estimates.
The revision stems from an anticipated surge in Middle Eastern oil supply returning to market, layered on top of already elevated U.S. exports and persistently weak Chinese crude buying. Those dynamics, analysts argue, will tip the global balance into surplus within months.
The Strait of Hormuz — a chokepoint for roughly a fifth of the world's petroleum — had been partially disrupted by geopolitical tensions and tanker insurance hurdles. Its reopening is expected to release millions of barrels per day of pent-up supply from producers like Saudi Arabia and Iraq.
On the demand side, China's sluggish economic recovery continues to cap crude imports, while U.S. production remains near record levels. The combination creates what the bank calls a “full-circle” return to oversupply not seen since the 2020 price war.
Not all analysts agree with the bearish call. Some rival forecasters argue that OPEC+ production discipline and potential supply cuts could absorb the extra barrels, and that Chinese demand may rebound faster than expected on stimulus measures.