Morgan Stanley sees Brent mid-to-high $70s/b in 2H of 2021

Quantum Commodity Intelligence – US investment bank Morgan Stanley remains broadly upbeat on oil prices for the remainder of the year, amid a firm global economic recovery and cohesion among the OPEC+ producer group members.

Morgan Stanley said that despite the OPEC+ agreement to add 400,000 bpd each month up to the end of the year, plus a 400,000 bpd growth forecast for US output between Q2 and Q4, "we still see the market in a stronger deficit in the second half even compared to the first half of 2021."

The bank said it expects Brent prices in the mid-to-high $70s per barrel as the most likely scenario for the remainder of the year, although it sees potential demand erosion in the $75-$80/b range.

On the spread of the Covid-19 Delta variant, the report acknowledged, "some soft spots have emerged in the oil demand recovery, but this is unlikely to change the outlook fundamentally."

"In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in 2H and we expect OPEC to remain cohesive," it said.

OPEC+ agreed last weekend to a deal that will add 2 million bpd by the end of the year, while the producer group will decide on a 2022 output strategy at a later date.  

Earlier this week Goldman Sachs revised down its short-term price outlook to $75/b.