Tags: Morgan | Stanley | crude | oil

Morgan Stanley: Brent Crude May Fall to $43 Next Year

By    |   Monday, 08 December 2014 11:39 AM

Morgan Stanley slashed its 2015 estimate for oil prices.

Its analysts say Brent crude may average as little as $53 a barrel next year amid burgeoning supply,  q reports. To be sure, their base case is for an average price of $70 in 2015. The analysts' previous estimate was $98.

January Brent futures fell to a five-year low of $63.05 Monday on the Nymex.

Oil prices are slumping amid sluggish demand and bulging supply. Demand is suffering from stagnant economies overseas, and supply has been boosted by the U.S. shale revolution. U.S. oil output has soared to its highest level in more than 31 years.

"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015," Morgan Stanley analysts Adam Longson and Elizabeth Volynsky write in a commentary obtained by CNBC.

OPEC failed to act at its meeting last month to lift prices. "Prices are set up to fall in the first half of 2015," with Brent possibly plummeting to $43 in the second quarter, the analysts said.

"Lower prices will curtail investment, increase the risk of OPEC intervention or an outage, or even shut in wells. Based on our forecasts, activity should slow sharply, and if intervention is large and swift, price recovery in [the second half of 2015] could be swift as well," the analysts explain.

Many market participants are bearish for the short run too.

"The near-term risk is for additional long-liquidation," Ole Hansen, head of commodity strategy at Saxo Bank, tells Bloomberg. "The belief is spreading that we could hit $60 or even lower before this stabilizes."

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Morgan Stanley slashed its 2015 estimate for oil prices.
Morgan, Stanley, crude, oil
Monday, 08 December 2014 11:39 AM
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