Morgan Stanley, HSBC slash crude oil supply forecast; Brent average pegged near $70 for 2025 after OPEC+ verdict | Stock Market News

OPEC+ verdict: Leading global investment bankers Morgan Stanley and HSBC revised down their expectations for an oil market surplus next year and forecast a Brent crude price of $70 per barrel, following a decision by the Organisation of Petroleum Exporting Countries (OPEC) to delay and slow plans for a higher crude output. The decision comes after crude prices have weakened 18 per cent since June over an oversupply in the market and low war-related risk premium.

On Thursday, OPEC and its allies including Russia (OPEC+), postponed the start of oil output increases by three months until April 2025. The oil cartel also said the cuts would take place until September 2026, nine months later than what was previously planned. OPEC+ has discussed plans of a supply hike since June.

Brent crude average, oil supply forecasts for 2025

According to news agency Reuters, Morgan Stanley raised its Brent forecast for the second half of 2025 to $70 from $66-68 per barrel. The bank lowered its estimate for OPEC-9 (OPEC members minus Iran, Libya and Venezuela who are exempted from output curbs) production by 400,000 barrels per day (bpd) for 2025, and by 700,000 bpd by the fourth quarter of next year.

It also cut its estimate for Iran’s production by about 100,000 bpd through 2025. “In aggregate, this reduces our estimated surplus in 2025 from 1.3 to 0.8 million bpd in our total liquids balance, and from 0.7 to 0.3 million bpd in our crude-only balance,” said Morgan Stanley in its note on Thursday, December 5.

On the other hand, HSBC maintained its Brent crude price forecast at $70 per barrel for 2025 and beyond, it said in a note on Friday. The bank anticipates an oil market surplus of 0.2 million barrels per day in 2025 if OPEC proceeds with planned production hikes in April. Previously, it had expected a surplus of 0.5 million bpd.

Bank of America (BoFA) expects Brent oil prices to average $65 per barrel, assuming no significant increase in OPEC production volumes in 2025. “Demand growth has slowed this year and is expected to remain tepid in 2025 too, tipping the market into surplus next year,” said BoFA. The weak demand outlook is the Achilles’ heel for OPEC , the bank said, and forecast global oil demand growth averaging one million bpd this year and 1.1 million bpd next.
 

Oil Prices Today

Crude oil slid to the lowest in three weeks on concerns about excess supplies and a wave of technical selling. US West Texas Intermediate (WTI) futures declined as much as 1.9 per cent to trade below $67 a barrel and touch its lowest intraday price since November 18. Brent traded near $71.

Despite OPEC vowing to return output to the market at a slower pace than initially planned, a looming supply surplus continues to pressure prices. Both WTI and Brent have met resistance at their short-term moving averages, prompting algorithm-driven traders to enter the market and extend losses.

Yesterday, OPEC+ opted to start with a modest output increase in April and unwind the cuts over 18 months. The deferral was aimed at offsetting a seasonal demand lull early next year, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman told CNBC on Friday. Banks still largely expect a surplus in 2025 as Chinese demand growth cools and production from the Americas swells.

“The first quarter is not a good quarter to bring volumes,” Prince Abdulaziz bin Salman told CNBC in an interview. “That quarter is known to be a quarter for building stocks.” Despite deciding to postpone, Prince Abdulaziz said that the alliance “honestly believe the market next year will be better than what is being projected.”

Eight OPEC countries will extend their “voluntary adjustments” of 2.2 million bpd until the end of March, the Vienna-based group said in a statement following a virtual meeting. After that, those cuts “will be gradually phased out” monthly until the end of September 2026, “subject to market conditions”.

Without a new agreement, the eight countries were set to begin increasing production in January to gradually return it to 2023 levels. Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, and the United Arab Emirates have already twice pushed back the production increases that were set to begin in October and then in December.

For several months, OPEC+ has been seeking to restore output halted over the past two years, but been frustrated as faltering demand in China and swelling supplies from the Americas pressure crude prices. Many analysts predict that global oil markets will still face a surplus in 2025 even if OPEC does not raise output.

Crude has been range-bound since mid-October, with bullishness from geopolitical developments in the Middle East and Ukraine countered by expectations of a glut in 2025. The potential for Trump administration tariffs and possible sanctions on Iran also are injecting uncertainty into the market.