Morgan Stanley: Oil’s Recovery Might Take Even Longer Than Expected

From OilPrice.com: Morgan Stanley’s recent prediction placing the end of the oil market supply glut around mid-2017 is losing backing from its central proponent.

The firm’s head of energy research, Adam Longson, said on Friday that market volatility over the past two years has led many previous forecasts to be incorrect.

“We are not yet changing our forecast for a mid-2017 rebalancing, but our conviction level is falling,” Longson wrote in a statement on Friday, according to Business Insider. “An oil recovery has been 6-12 months away in the minds of investors since late 2014, but “unforeseen” events have led to consistent delays. Once again, we see an increasing probability for several bearish developments to come together, which could push off rebalancing (seasonally-adjusted demand exceeding supply) to late 2017 or 2018.”

This Friday’s Baker Hughes report marked 11 straight weeks of no-decline in the U.S. oil rig count, meaning domestic production is on the rise, and while the rising count may not immediately affect prices, it could signal a sustained oil glut in the coming weeks.

“The U.S. continues to surprise, and the market seems to be underestimating the impact of some rigs that have already been added,” Longson noted, adding that a majority of the new rigs have begun work in areas where high-quality crude is cheaply available – especially the Permian Basin.

Longson has been known to be a bearish analyst, more likely to predict price slides than hope for redeeming spikes. This time last month, Longson predicted that oil prices would decrease to $35 within the next one to three months because “very little has been addressed fundamentally to correct” the excess supply problem that led the market price to the current dead end.

The United States Oil Fund LP (ETF)(NYSE:USO) closed at $10.59 per share on Friday, down $0.37 (-3.38%). The largest ETF tied to the price of WTI crude oil has fallen 3.73% year-to-date.

This article is brought to you courtesy of OilPrice.com.

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