Oil Market Sees Upside Risks as Global Disruptions Mount

Oil prices are expected to face significant upside risks in the coming months due to a combination of global supply disruptions, constrained shipping, reduced refining capacity, and declining inventories. Morgan Stanley has retained its average Brent crude forecast at $100 per barrel for the fourth quarter of 2026, warning that quarterly averages do not rule out higher prices.

The global brokerage firm highlighted several key factors contributing to the tight oil market. Constrained exports through the Strait of Hormuz and reduced flows through the Bab el-Mandeb are causing disruptions, while the shutdown of Saudi Arabia's East-West pipeline is further exacerbating the issue.

Additionally, historically low water levels on the Rhine have affected refined-product shipments into Europe, pushing freight rates to record levels. Tight tanker availability has limited regional markets' ability to arbitrage supply shortages.

Morgan Stanley estimates that the oil market will remain in deficit through the fourth quarter of 2026 and the first quarter of 2027. The brokerage's base-case Brent forecast stands at $100 per barrel for Q4 2026 and $95 per barrel for Q1 2027, before easing to $90 in Q2 and $80 in Q3.