By Anthony Harrup

The decision by the Organization of Petroleum Exporting Countries and its allies to further accelerate production increases in June prompts analysts at Morgan Stanley to lower their crude price estimates by between $5 and $10 a barrel.

The investment bank cut its price forecast for Brent crude to $60 a barrel in the second quarter from $65, and to $57.50 from $62.50 for the second half of this year. Morgan Stanley sees Brent falling to $55 a barrel in the first half of 2026, down from its previous $65 estimate, before recovering toward the end of next year.

"OPEC's quota revision came in higher than we had expected, and is likely a precursor for further supply increases in months ahead," the analysts said in a report. "It points towards a production trajectory that is meaningfully higher than our prior modelling assumption and weighs negatively on our oil price outlook."

Brent was trading down 1.9% Monday at $60.12 a barrel.

OPEC said Saturday that the eight producers that have made voluntary additional output cuts, including allies Kazakhstan and Russia, will increase output by 411,000 barrels a day in June, following a similar-sized increase in May. OPEC said the increases provide opportunity for countries that have produced above quota to accelerate their compensation, and reiterated that the gradual increases could be paused or reversed depending on market conditions.

With the additional OPEC+ output, Morgan Stanley raised its expected supply surplus for oil liquids in the second half of this year to 1.1 million barrels a day from 700,000 barrels a day, and for 2026 to 1.9 million barrels a day from 1.5 million barrels a day.

Past episodes of OPEC's unwinding production came at times of tightening balances due to higher demand or supply disruptions elsewhere, Morgan Stanley said. "Although the crude market appears balanced in coming months as summer demand kicks in, those conditions do not apply at the moment."

The bank expects oil liquids demand growth of 700,000 barrels a day this year and 600,000 barrels a day in 2026 to be more than met by non-OPEC supply increases of 1.2 million barrels a day this year and 1.1 million barrels a day in 2026, with additional OPEC supply growth on top of that.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

May 05, 2025 13:33 ET (17:33 GMT)

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