Morgan Stanley raised its price forecast for Brent crude for 2026 to $60 per barrel from $57.50 following OPEC+’s decision to pause production hikes over the first three months of next year.
This was the first oil price forecast revision after the Sunday meeting of the oil-producing group, which also produced one last output hike of 137,000 barrels daily for December.
“Even if the OPEC announcement does not change the mechanics of our production outlook, it does send an important signal,” the bank’s analysts said in a note, quoted by Bloomberg. “With OPEC involvement, volatility is reduced.”
Investment banks have been quick to revise their price predictions for international oil benchmarks after almost every OPEC+ meeting, with the revisions being invariably in the downward direction amid expectations of a supply overhang emerging this year and extending into 2026.
According to ING’s head of commodity analysis, Warren Patterson, OPEC+’s decision to pause the hikes is an acknowledgment of that fundamentals imbalance. “Obviously, still plenty of uncertainty over the scale of the surplus, which will be dependent on how disruptive U.S. sanctions will be to Russian oil flows,” Patterson said, as quoted by Reuters, today.
RBC Capital Markets’ Helima Croft, for her part, noted Russia as a wild card, both because of the latest U.S. sanctions that have seen the two biggest importers of Russian crude shun it in favor of sanction-free alternatives, and because of continued Ukrainian attacks on oil infrastructure that could threaten supply security.
“There is ample ground for a cautious approach given the uncertainty over the Q1 supply picture and the anticipated demand softness,” Croft said, as quoted by Reuters. The latest Ukrainian attack targeted the oil export terminal at the port of Tuapse yesterday. According to reports, the fire that the attack caused had damaged a ship.
By Irina Slav for Oilprice.com
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