Morgan Stanley Now More Bearish | Russell T. Rudy Energy LLC
For some time now Morgan Stanley has not had any illusions about oil prices for the rest of 2015. However, they had faith that there would be a recovery thereafter. Now “World Oil” reports that the investment firm has downgraded their projections for the future.
Previous forecasts were based on four factors: demand would rise in response to lower prices, falling prices would result in less spending and lower production, oil company stock prices would remain low, and oil supply would decrease. While the first three assumptions proved accurate, oil supply has not co-operated.
The reality is that U. S. production has leveled off, not fallen, since June and OPEC production has surged. Morgan Stanley still contends that prices will improve in the longer term because OPEC currently has little spare capacity and stocks of the major oil companies are already trading near 35 year lows.
Nevertheless, the global oil glut shows no signs of diminishing. As sanctions against Iran are lifted and Libya stabilizes, new production will likely come on line. Also, U. S. shale producers have proven remarkably resilient and an increase in domestic production is not out of the question. Consequently, Morgan Stanley feels that the current slump in prices could continue for three more years. If this happens, it would be the worst in thirty years; far worse than the downturn of 1986.
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/7/23/oil-warning-crash-could-be-worst-in-more-than-45-years .
