Why did Morgan Stanley downgrade its oil price forecast for 2026 Q3 and Q4, and what new price levels did it set?

Morgan Stanley downgraded its oil price forecast for 2026 Q3 and Q4 due to the expected acceleration of global oil market re-entry into supply surplus, driven primarily by the anticipated reopening of the Strait of Hormuz. The bank revised its Brent crude average price forecast for 2026 Q3 from $90 per barrel to $75 per barrel—a $15 reduction—and similarly lowered its Q4 2026 forecast to $75 per barrel, a $5 cut from its mid-June projection. The firm attributes this sharp downward revision to faster-than-expected return of crude supply, citing both the recovery of Middle Eastern output and persistently high U.S. crude exports as key factors that will push the market back into oversupply within the coming months.

What is Morgan Stanley’s long-term outlook for Brent crude prices, and how does it compare with Goldman Sachs’ updated forecast?

Morgan Stanley forecasts that Brent crude prices will decline further to $70 per barrel by the end of 2027, reflecting its view of deepening supply surplus and a structural shift in oil fundamentals from tightness to looseness. In comparison, Goldman Sachs also revised its forecasts downward—cutting its Q4 2026 Brent prediction from $90 to $80 per barrel and lowering its 2027 average price forecast from $80 to $75 per barrel—indicating a broad market consensus on accelerating supply normalization. While both banks agree on the direction and drivers (notably Strait of Hormuz reopening and resilient non-OPEC supply), Morgan Stanley’s $70 year-end 2027 target is notably more bearish than Goldman Sachs’ $75 2027 average, suggesting a steeper and more sustained price decline in Morgan Stanley’s base case. Both institutions link their revisions to recalibrations of supply recovery speed, though Goldman Sachs adds the caveat that alternative shipping routes developed during the crisis may permanently suppress pre-crisis Strait traffic volumes.

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Morgan Stanley and Goldman Sachs cut Brent crude forecasts for 2026-2027 to $70-$75, citing Middle East supply recovery and US exports, indicating a market shift from tightness to oversupply.

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