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(Bloomberg) — Morgan Stanley cuts its oil price forecasts as flows through the Strait of Hormuz return faster than expected, while strong US supply and weak Chinese demand increase the risk of a surplus.
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The bank lowered its third-quarter 2026 Dated Brent forecast by $15 to $75 a barrel, analysts Martijn Rats, Charlotte Firkins and Amy Gower said in a note dated Monday. Prices are set to drop further by the third quarter of next year, to $70.
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“Exports via the Strait of Hormuz are recovering faster than expected,” they said. Meanwhile, “the ‘twin solvers’ that allowed the market to adapt in the last few months – i.e. high US exports, low China imports – are largely still in place.”
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Although traffic in the chokepoint slowed over the weekend after a flare-up in the conflict that saw two ships hit, there were indications tanker companies and their crews are willing to navigate Hormuz. That’s a critical step to returning the global oil market to normal and unlocking millions of barrels of supply from the energy-rich region.
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Morgan Stanley said it counted 35 oil and gas tankers exiting the Persian Gulf through the strait on Thursday — the first time the level returned to the 30 to 40 range typical before the conflict started in February. To balance the oil market in 2027, flows through Hormuz only need to recover to about 65% of the pre-conflict level, or about 11 to 12 million barrels a day, the bank said.
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Brent futures, which rose to a peak above $126 in April, have erased their gains as Iran and the US continue talks aimed at permanently ending the four-month war. The most-active September contract closed at $73.91 on Monday.
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