Oil Glut Warning: Morgan Stanley Slashes Forecasts as Hormuz Flows Surge Amid Global Supply Excess

Oil Glut Warning: Morgan Stanley Slashes Forecasts as Hormuz Flows Surge Amid Global Supply Excess​

Global Markets Brace for Oversupply as Analysts Downsize Oil Price Outlook​

Morgan Stanley has significantly trimmed its oil forecasts, citing the rapid return of tanker traffic through the Strait of Hormuz. This development, coupled with strong US supply and weak Chinese demand, raises serious concerns about a global oil glut in the coming years.

The investment bank adjusted its estimates for Dated Brent, a key benchmark for physical transactions. They now anticipate the price to average $75 a barrel across the third and fourth quarters of next year. Furthermore, Morgan Stanley has cut all four-quarter outlooks for the coming year, predicting Dated Brent will reach $70 by the end of 2027.

Hormuz Reopens Faster Than Expected Driving Price Corrections​

The recent resumption of maritime traffic through the Strait of Hormuz is a critical market development. This return signals that the global supply chain is beginning to normalize after the preceding instability.

Morgan Stanley noted that "the Strait is reopening faster than expected." However, they caution that this must be balanced against two prevailing factors: high US exports and depressed Chinese imports. The bank stated that as attention shifts toward 2027, the market trajectory points back toward a period of surplus.

Market Reaction and Global Benchmark Shifts​

The oil market has reacted sharply to these developments. Brent futures, the global benchmark, have seen a steep decline of about 30% this quarter. This downturn reflects the progress made in peace talks between the US and Iran, which permitted traffic through the chokepoint to resume partially.

In addition to Morgan Stanley's assessment, Goldman Sachs Group Inc. has also reduced its oil outlook, contributing to the broader market correction. The most-active September Brent contract traded at $73.47 on Tuesday, a noticeable shift from earlier peaks.

Monitoring Tanker Flows and Supply Balance​

Morgan Stanley monitored tanker movements closely, reporting 35 oil and gas tankers exiting the Persian Gulf through the strait on Thursday. This figure marks a return to the 30-to-40 range that was typical before the conflict escalated in February.

For the world market to maintain balance by 2027, Morgan Stanley calculated that flows through Hormuz must recover to only about 65% of the pre-conflict level. This target translates to approximately 11-to-12 million barrels a day for the strait's throughput.

Outlook Summary and Price Trajectory​

Brent futures saw their war-time gains erased as diplomatic efforts continue between Iran and the US toward lasting peace. The interim peace accord has enabled this incremental resumption of traffic through the strategically vital chokepoint.

The expectation remains that global supply is robust, making sustained high prices unlikely in the longer term. Morgan Stanley's cumulative cuts across all four quarters underscore a shift from geopolitical risk premium back towards fundamental market realities and potential oversupply concerns.