(Reuters) - Morgan Stanley on Monday lowered its oil price forecasts further, citing the collapse of the OPEC+ deal that has stoked concerns of oversupply in a market battling sluggish global demand.
“Despite the sharp decline in oil prices, it is unlikely that OPEC+ countries will return to the negotiation table anytime soon ... We expect that much of the announced volumes will indeed come to the market, at least for a short period,” the bank said in a note.
Three years of cooperation between OPEC, Russia and other producers, known as OPEC+, ended in acrimony on March 6 after Moscow refused to support deeper cuts to cope with the outbreak of coronavirus. OPEC responded by removing all limits on its own production.
A planned technical meeting between the Organization of the Petroleum Exporting Countries and non-OPEC countries on Wednesday in Vienna has been called off.
Morgan Stanley lowered its oil price forecasts for the second time this month, reducing its second-quarter Brent outlook to $30 per barrel from $35.
“Temporary sell-offs to even lower levels are possible, if not likely,” the bank said.
It sees oversupply reaching 3.5 million barrels per day this year.
With the virus continuing to spread, demand for transportation fuel is unlikely to rebound meaningfully in coming months, Morgan Stanley added.
Oil prices fell below $30 a barrel on Monday as the pandemic exacerbated fears that government lockdowns to contain the spread of the disease would spark a global recession.
Reporting by Eileen Soreng in Bengaluru; Editing by Matthew Lewis