Morgan Stanley Cut WTI Oil Price Forecast to $55

Major oil producers led by OPEC have agreed to extend their crude output cuts through March of next year, but that could feed a glut of global supplies once the deal is done.

The Organization of the Petroleum Exporting Countries’ 14 current members and 10 non-OPEC members agreed Thursday to continue their cuts of 1.8 million barrels a day, generally from October 2016 crude production levels, through the first quarter of 2018.

“We do not expect that they will extend [the cuts] much beyond that,” Martijn Rats, head of the European oil and gas research team at Morgan Stanley, wrote in a note dated late Thursday. “OPEC production cuts have finite lifespans.”

Compliance with the cuts by OPEC members has been high—at 96%, according to the International Energy Agency’s May oil report.

But in his note, Rats expressed concerns about what will happen once the deal ends. If that coincides with strong shale-oil growth, the market looks to be oversupplied again, he said.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza