- Increased geopolitical risk in oil-producing regions is seen as a key driver of higher oil prices.
- Tighter markets due to OPEC+ cuts and Russia’s export limitations are putting upward pressure on prices.
- In an increasingly bullish oil market, Morgan Stanley sees Brent Crude hitting $94 per barrel in the third quarter of 2024.
That the degree of geopolitical risk in key oil producing regions has increased recently seems clear and uncontroversial,” Morgan Stanley analysts wrote in a note cited by Reuters.
Last month, the bank had already hiked its third-quarter oil price forecast by $10 per barrel, to $90, on the back of expected tighter markets in the summer. The tighter balance is expected due to the OPEC+ group’s production cuts and reduced supply from Russia which pivoted to output cuts instead of export cuts following the lowered refining capacity amid Ukrainian drone strikes on Russian refineries.
Also last month, Morgan Stanley’s global oil strategist Martijn Rats said that oil prices could rise so sharply that they might take some market participants by surprise.
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“We expected inventories to build, but year-to-date, they are kind of flat. If in the first quarter, inventories [are] flat then they can draw possibly quite significantly during the summer period,” Rats told CNBC in the middle of March.
Brent Crude already hit $90 per barrel last week, the highest level so far this year and the highest in almost six months.
In recent weeks, banks including JP Morgan have said that oil prices could hit $100 per barrel by the end of the summer.
“At face value, and assuming no policy, supply or demand response, Russia’s actions could push Brent oil price to $90 already in April, reach mid-$90 by May and close to $100 by September,” JP Morgan strategists led by Natasha Kaneva wrote in a note at the end of March, as carried by Yahoo Finance.
However, demand destruction could prevent prices from reaching triple digits, JP Morgan says.