Bank lifts price outlook citing faster-than-expected inventory declines and prolonged Middle East supply constraints through early 2027.
Morgan Stanley increased its Brent crude price forecast to $100 for Q4 2026, up from a prior $75 estimate, as oil markets tighten faster than anticipated. The bank cited falling oil-on-water and onshore inventories, including in China, alongside a slower-than-expected Middle East supply recovery extending into 2027.
The revised outlook reflects a market deficit through Q4 2026 and Q1 2027, with crude futures settling at $85.01. A wide gap between crude and refined product prices, particularly gasoil trading above Brent, signals strained refining capacity. The bank also warned of potential spillover effects on US equities and bond yields.
Morgan Stanley’s equity strategist identified a renewed oil spike as the single biggest risk to US stocks, suggesting energy shares as a portfolio hedge. The bank’s bullish view implies potential shifts in cross-asset positioning if the tighter-for-longer scenario materializes.