Global oil market to tip into surplus by 2027, Morgan Stanley predicts

Morgan Stanley has lowered its Brent crude price forecasts for the remainder of this year and for 2027, citing a faster-than-expected reopening of the Strait of Hormuz and a shift in market focus toward a significant surplus projected for 2027.

According to Reuters, the bank revised its third-quarter 2026 Brent forecast to $75 per barrel, down from a previous estimate of $90, and reduced its fourth-quarter 2026 outlook to $75 from $80. It now expects Brent to average $75 per barrel in the first half of 2027 and $70 in the second half, compared with an earlier forecast of $80.

In a note dated Monday, Morgan Stanley said that with Middle Eastern exports ramping up again, a supply shortfall that had been rapidly diminishing is now turning into a surplus in both the Brent and Dubai markets.

The bank now projects an implied global oil market surplus of 4.8 million barrels per day (bpd) in 2027. At the start of 2026, before the conflict, its balances had pointed to a 2-million–3-million bpd surplus for the year. The closure of the Strait of Hormuz temporarily reversed that surplus into a deep deficit.

According to Morgan Stanley analysts, flows through the Strait of Hormuz only need to recover to 11 million–12 million bpd—around 65% of pre-conflict levels—to balance the market in 2027.

This marks the bank’s second downward revision in prices since the announcement earlier this month of a U.S.-Iran agreement to halt the war in Iran and reopen the Strait of Hormuz.

Meanwhile, diplomatic uncertainty persists. Iranian and U.S. negotiating teams were expected to meet in Doha this week, but Iran said on Monday that no meeting had been scheduled, as weekend missile exchanges between the two sides tested the interim ceasefire aimed at ending the four-month conflict.

Oil prices fell on Tuesday and were on track for a third consecutive monthly decline, putting them on course for their steepest quarterly drop since early 2020. Brent August crude futures were down 0.9% at $72.47 a barrel as of 0706 GMT, while U.S. West Texas Intermediate crude for August delivery fell 0.5% to $70.24 per barrel.

By Tamilla Hasanova