[ET Net News Agency, 9 March 2020] Morgan Stanley said a series of production cuts over
the last 3+ years ultimately failed to boost oil prices but nevertheless led to
considerable erosion of OPEC market share.
The research house argued that continuing production cuts may no longer be in OPEC's
long-term interest. Hence, risks that OPEC+ would abandon this strategy were increasing.
From the end of March, there are no constraints to oil production for any OPEC+ member
countries. From here, the incentive for individual countries is to maximize production and
rebuild market share.
Following the November 2014 meeting - an analogous break-down - OPEC output rose by 1.5
mb/d over the subsequent 12 months. On this occasion, Morgan forecast a similar increase
in OPEC+ production of 1.4 mb/d between January and December 2020, leading to a 1.0 mb/d
upward revisions in its forecast for OPEC+ production in 2020.
Morgan estimated Brent will need to fall to US$35/bbl (previous forecast US$57.5) in 2Q,
and US$40-45/bbl (previous forecast US$60) in 2H. For NYMEX WTI, Morgan revised down its
forecasts to US$30, US$35, and US$40 for 2Q, 3Q, and 4Q respectively, down from US$52.5,
US$55, and US$55. (KL)