Morgan Stanley warns oil prices could top $100 forecast

Morgan Stanley ↘ 0.55% has retained its average Brent crude forecast at $100 per barrel for the fourth quarter of 2026, warning that risks are "skewing to the upside" as an unprecedented convergence of supply disruptions tightens global oil markets, according to a research report published this weekend.tribuneindia+1

The warning came days after the International Energy Agency said the global oil supply gap will widen further this year, with world supply now expected to decline by 5.7 million barrels per day as the return of normal Gulf oil flows has been deferred into 2027.iea+1

A Cascade of Disruptions

Morgan Stanley The Goldman Sachs Group, Inc. ↘ 0.36% cited an "unusually large number of disruptions" hitting markets simultaneously: constrained exports through the Strait of Hormuz, reduced flows through the Bab el-Mandeb strait, the shutdown of Saudi Arabia's East-West pipeline, and record tanker freight rates that have limited the ability of regional markets to offset shortages.rediff+1

The Saudi pipeline shutdown, triggered by drone attacks from Iraq on September 11, removed a critical workaround that Riyadh had used to bypass the contested Strait of Hormuz. The 7-million-barrel-per-day pipeline is expected to remain mostly offline for three to five weeks, and Reuters reported that Saudi Arabia could run out of export stocks if the pipeline is not restarted quickly, threatening a loss of up to 4% of global supply.reuters+2

Buffers Running Thin

The brokerage warned that the market cushions that had absorbed earlier disruptions are now eroding. Strategic petroleum reserve programmes are nearing completion — the IEA coordinated the release of 400 million barrels earlier this year, its largest ever — while commercial inventories have fallen to low levels and U.S. crude exports have reversed.iea+1

Morgan Stanley estimates the oil market will remain in deficit through Q4 2026 and Q1 2027, with Brent easing to $95 per barrel in Q1 2027 before declining to $90 in Q2 and $80 in Q3. The IEA's September report projected world oil supply averaging 100.7 million barrels per day in 2026, down 1.3 million barrels per day from its previous estimate.tribuneindia+1

Markets Caught Between Fear and Resilience

The tightening oil market has rippled through financial markets. The 10-year Treasury yield has hovered near 5%, and the Federal Reserve raised interest rates for the first time in three years last week. Yet equity markets have remained near all-time highs. UBS Wealth Management's Mark Haefele told clients Friday that geopolitical drawdowns in the S&P 500 historically last a median of just 16 days.finance.yahoo

JPMorgan ↘ 0.84% offered a more cautious view. "For the first time since the start of the Iran conflict, we don't have a baseline view," commodities strategists led by Natasha Kaneva wrote. "We simply don't know how to model the endgame."finance.yahoo