OPEC+ Increases and Non-OPEC Growth Poised to Pressure Brent Prices to $60 says (MS)

Morgan Stanley (MS) forecasts Brent crude will retrace to about $60 per barrel by early 2026 as robust non-OPEC supply growth and easing Israel-Iran tensions alleviate market tightness. The bank anticipates non-OPEC production to expand by roughly 1 million barrels per day in both 2025 and 2026, enough to satisfy rising demand. At the same time, OPEC+ is rolling back its quota cuts, driving a projected surplus of approximately 1.3 mbd in 2026. Market Overview:

• Morgan Stanley sees Brent at ~$60/bbl by early 2026;
• Non-OPEC supply growth of ~1 mbd annually vs. demand;
• OPEC+ to add 411,000 bpd in July after prior increases.

Key Points:

• Oversupply of ~1.3 mbd expected in 2026;
• Geopolitical risk premium to fade post-de-escalation;
• Analysts slightly lift price forecasts amid Middle East flare-ups.

Looking Ahead:

• Monitor OPEC+ production adjustments beyond July;
• Watch demand trajectory as economic growth evolves;
• Assess geopolitical developments for sudden price shocks.

Bull Case:

• Robust non-OPEC supply growth—expected to rise by about 1 million barrels per day in both 2025 and 2026—will help meet global demand, reducing the risk of market tightness and price spikes.
• Easing tensions between Israel and Iran are likely to lower the geopolitical risk premium, leading to more stable and predictable oil prices and supporting economic growth in energy-importing countries.
• With OPEC+ rolling back quota cuts and increasing production, the market is expected to remain well-supplied, reducing the likelihood of supply shocks and supporting consumer and business confidence.
• Lower oil prices—potentially reaching $60 per barrel for Brent by early 2026—could ease inflationary pressures, supporting central banks’ efforts to cut interest rates and boosting overall market sentiment.
• Analysts have only slightly lifted price forecasts in response to Middle East flare-ups, suggesting that the market is resilient to short-term volatility and remains anchored by strong fundamentals.
• Investors can monitor supply data, OPEC+ decisions, and demand indicators to make informed decisions, with the potential for upside if demand surprises to the upside or if OPEC+ adjusts output more aggressively than expected.

Bear Case:

• Morgan Stanley forecasts a significant oversupply of about 1.3 million barrels per day in 2026 as OPEC+ continues to roll back quota cuts, which could drive oil prices down to $60 per barrel and pressure producer revenues and margins.
• Lower oil prices may reduce incentives for investment in new production, potentially setting the stage for future supply shortages and price volatility if demand rebounds unexpectedly.
• Despite recent de-escalation, geopolitical risks in the Middle East remain elevated, and any sudden escalation or disruption to supply could trigger sharp price spikes and market turmoil.
• Tempered demand projections due to global economic uncertainty or trade tariffs could further weigh on oil prices, exacerbating the oversupply situation and hurting energy sector stocks.
• OPEC+’s ability to manage production and support prices may be tested if the surplus persists, potentially leading to internal discord and less effective market management.
• Investors face uncertainty about whether Brent’s descent to $60 will be a durable shift or a temporary correction, making it challenging to position portfolios for the long term.

Brent futures edged down to $67.61 on Monday, while U.S. WTI settled at $65.11, reflecting the tug-of-war between rising output and tempered demand projections. Investors will track supply data, OPEC+ decisions, and demand indicators into 2026 to gauge whether Brent’s descent to $60 marks a durable shift or a temporary correction.

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