The oil market has changed so much over the past five years that fast-growing non-OPEC oil production limits oil price gains from a spike in tensions in the Middle East, where Iran seized a British oil tanker last week, Morgan Stanley says.
“There is a difference in the oil market this time around because non-OPEC is simply growing so fast. That is the real game changer and that’s why the price action is relatively benign,” Morgan Stanley’s global oil strategist Martijn Rats told CNBC on Monday, commenting on the muted price reaction to Iran seizing a British tanker in Middle Eastern waters on Friday.
If such an incident in the most important oil shipping lane in the world, the Strait of Hormuz, happened just five years ago, oil prices wouldn’t have risen just 1-2 percent, the spike would have been “much, much more significant,” Rats told CNBC.
We are in a fundamentally well-supplied oil market, Morgan Stanley’s Rats said, adding that with non-OPEC oil production growing very fast and oil demand somewhat soft, it’s actually “quite remarkable that we’re only at $63 a barrel, despite these concerns.”
At the beginning of this month, just after OPEC and its allies rolled over their production cuts into 2020, Morgan Stanley revised down its long-term Brent Crude forecast to $60 from $65 a barrel. Over the next three quarters, the bank sees Brent at around $65 per barrel, a downward revision from a previous forecast of $67.50 a barrel.
On Friday, before news broke that Iran had seized a tanker, Fatih Birol, the executive director of the International Energy Agency (IEA), said that slowing oil demand growth and a persistent global glut would cap oil prices and keep them from rising too much, barring serious escalations in geopolitical tensions.