Financial services giant Morgan Stanley has downgraded its forecast for oil prices, predicting low prices to endure for longer than the bank previously thought.
This is due to the fact that there is currently an oversupply of, and a declining demand for, crude oil. This is set to continue for another two years minimum.
Morgan Stanley decreased its average 2016 Brent forecast to just $30 (£20.54) per barrel, which is significantly down from the $49 (£33.56) it had previously predicted. The bank now believes that oil will fetch an average price of $40 (£27.39) a barrel in 2017 as the current oversupply continues, eventually climbing above $50 (£34.24) by the end of the year, with a rise of $20 to $70 (£47.94) per barrel by 2018.
Morgan Stanley analyst Andrew Sheets said that demand is growing slowly, which presents a problem for the industry because demand is lagging behind supply. Due to seasonal effects, Sheets predicts that it could be around 18 months until demand has successfully managed to play “catch up”.
Sheets also commented that any future recovery of oil process would require a ‘three-step’ process whereby oversupplied markets would need to cut production and increase demand by working off high oil inventories. This may help to restore balance, and start to get things back on track for the likes of ExxonMobil and Fuchs Petrolub, who manufacture high-quality oil products like Mobil Unirex EP2 and Fuchs Ecocool Ultralife A respectively, yet have been posed challenges by recent events in their industry.