Morgan Stanley Lowers Oil Price Forecast Amid US-Iran Peace Deal

Morgan Stanley has lowered its Brent crude oil price forecast for the fourth quarter of this year to $80 per barrel, down from previous estimates. The revision comes after the US and Iran signed a preliminary agreement to end the war in the Gulf.

The bank expects 50% of production to be restored by September and 80% by December, slightly faster than before. This is despite details of the agreement yet to be made public and both countries stating that a permanent truce has yet to be negotiated.

Oil prices have extended losses on Tuesday as markets weigh the prospects for a resumption of supply through the key Strait of Hormuz. Brent crude futures were down 1.3% to $82.06 per barrel, while US West Texas Intermediate was down 1.5% at $79.55 per barrel.

Morgan Stanley analysts still see a tight summer with a deficit of 3.4 million barrels per day expected in the third quarter. However, they believe that the undersupply will be limited to the third quarter and the oil market is expected to return to balance in the fourth quarter.