Why Oil Prices Could Rise to $100 Again

Summary

Morgan Stanley Global Commodities Strategist Martijn Rats argues the oil market has fundamentally tightened as floating and onshore inventories fall and supply buffers fade. Middle East supply remains constrained, SPR releases are ending, and Chinese import weakness is no longer cushioning the market. He now forecasts Brent to average $100 per barrel in Q4. Refinery outages have shifted tightness into refined products, with diesel crack spreads at record highs.

• Brent swung from above $110 in May to $71 in June, back above $100, then to around $79, before moving higher again.
• Floating crude oil inventories fell from nearly 1.3 billion barrels in mid-July to 1.1 billion barrels recently.
• Onshore crude inventories also fell by another 38 million barrels over the same period.
• Middle East exports remain sharply below the late-June peak, with Red Sea exports down from 4.5 million barrels per day to around 1.5 million barrels per day.
• Global strategic petroleum reserve releases are fading and no material further releases are expected after September.
• China's seaborne crude imports have stabilized with tentative signs of an increase.
• Global refinery outages are running 5-6 million barrels per day above normal, tightening refined product markets.
• The US front-month diesel crack spread reached around $100 per barrel, an all-time high.