Morgan Stanley expects Brent crude oil to average between $80 and $90 per barrel this year and warned that it could take several months for production to recover once the Strait of Hormuz reopens. The passageway, which handles 20% of global oil flows, has been operating at a near standstill since the U.S.-Iran war began on February 28.
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New trading tool for QQQ bulls“Even if the Strait reopens in the near term, it could take months for oil and gas production to normalize—creating a more prolonged supply shock and higher prices,” said Martijn Rats, Morgan Stanley’s Head Commodity Research.
Supply Risks Shift Oil Price Outlook Higher
Furthermore, the firm believes that the scenario of oil trading below $65 this year is becoming less likely because energy disruptions have “moved beyond logistics to production.”
In the event of an extended closure of the strait, oil could surge to between $150 and $180. However, oil could stabilize to Morgan Stanley’s base case of between $80 and $90 if traffic through Hormuz stabilizes within a month. If only 80% of normal traffic resumes within a month, oil could average between $100 and $110 for the year.