Morgan Stanley raised its 2024 and 2025 oil price forecasts by $2.50-$5/bbl, citing the recent decline in inventories as a sign that the market is tighter than initially expected. It now expects Brent to be around $82.50/b in the first quarter compared to $80/b previously, around $80/b in the fourth quarter, compared to $75/b previously, and $77.50 by the second half of 2025 from $72.50 previously. Analysts, including Martijn Rats, believe that OPEC's better-than-expected implementation of the production cut policy and the reduction in U.S. crude oil production due to cold weather have contributed to the inventory reduction. The bank also raised its oil demand growth forecast to 1.5 million b/d from 1.3 million b/d and lowered its demand growth forecast for non-OPEC countries to 1.5 million b/d from 1.7 million b/d.

Citi Research cut its Brent crude price forecast for this year and 2025 on Friday, citing concerns about oversupply, but expects oil prices to remain above $70 a barrel in 2024 as OPEC+ maintains a "fine balance" in the global oil market. Citi lowered its 2024 Brent crude oil price forecast by $1 to $74/b and its 2025 forecast by $10 to $60/bbl. But the bank said the recent Red Sea crisis has led to further tensions in the Middle East, and risk premiums could rise in the short term.

Citi analysts Max Layton and Francesco Martoccia, among others, said in the report that there is speculation that OPEC+ will cut production further, which could lead to a knee-jerk rise in oil prices by $5/bbl. The bank sees a 20% chance of a further 500,000 b/d cut by OPEC+. The most likely outcome is Saudi Arabia extending its voluntary production cut of 1 million b/d until the end of the first quarter, with other OPEC+ members broadly committing to comply with existing quotas until the end of 2024. There may be some minor changes to the quota. West African countries appear reluctant to further adjust their 2024 quotas.

Morgan Stanley lowered its Brent price forecast to the fourth quarter of 2024 and sees Brent at $70 a barrel in 2023. Morgan Stanley still expects crude oil inventories to decline in the third quarter, mainly driven by OPEC production cuts and positive seasonal factors, which will keep Brent crude oil prices in the mid-$70s/barrel. In 2024, non-PEC supply growth is likely to outpace global demand growth, a trend that is likely to continue. Discounted supplies of crude oil from Russia, Venezuela and Iran unexpectedly increased. However, Brent crude oil prices are expected to slow to $70/bbl as the market focus shifts from inventory drawdowns in the second half of 2023 to inventory builds in the first half of 2024