Morgan Stanley(US:MS)2025-05-20 05:38Investment Rating - The report maintains a cautious outlook on the crude oil market, indicating a seasonal demand support into Q3 but a softening of fundamentals thereafter [7][10]. Core Insights - Seasonal demand is expected to support crude oil prices into Q3, with a modest deficit anticipated during this period due to refinery maintenance and strong refining margins [10]. - The medium-term outlook is subdued, with rising supply from both OPEC and non-OPEC countries likely leading to a surplus by Q4 2025, which is expected to persist into 2026 [10]. - Demand forecasts remain unchanged at 0.7 million barrels per day (mb/d) for 2025, significantly below the historical trend of approximately 1.2 mb/d, primarily due to economic uncertainties and lower growth in oil demand from China [10]. - Non-OPEC supply is projected to increase by 1.2 mb/d in 2025, driven by countries such as the US, Canada, Brazil, Guyana, and Argentina, which exceeds total demand growth [10]. - OPEC is expected to announce further production quota increases, with a year-on-year growth of 0.3 mb/d in 2025 [10]. - A surplus of 1.3 mb/d is anticipated in Q4 2025, leading to higher inventories and a decline in Brent prices to the mid-$50s by the first half of 2026 [10]. Demand Summary - Global seaborne energy imports indicate a softening in global oil demand, with European crude imports showing weakness compared to seasonal patterns [62]. - The consensus sees oil demand growing by 0.7 mb/d in 2025, which is well below the long-term historical trend of around 1.2 mb/d per year [65]. - The consensus demand estimate has decreased by approximately 0.45 mb/d over the last six months, primarily due to tariffs affecting oil-intensive sectors [69]. - For 2026, demand growth is expected to slow to around 0.6 mb/d, down 0.2 mb/d from previous estimates [72]. - Despite robust data in Q1, overall demand remains below late 2023 levels, with China's oil demand showing only a modest recovery [77]. Supply Summary - Non-OPEC supply has shown signs of re-acceleration after a flat period in 2024, with annualized trend growth projected at 1.7 mb/d [94][95]. - Recent months have seen downward revisions in consensus estimates for non-OPEC supply growth in 2025, primarily driven by the US [99]. - Growth in natural gas liquids (NGLs), biofuels, and others is expected to add 0.2-0.3 mb/d, bringing total non-OPEC liquids supply to 1.3-1.4 mb/d [100].