Nov 29 (Reuters) - Morgan Stanley on Monday cut its first
quarter 2022 Brent crude price forecast to $82.50 per barrel
from $95 on market expectations that the Omicron coronavirus
variant could turn into a major headwind for oil demand.
The market appears to be pricing in the possibility that the
new variant could prompt restrictions and cut oil demand, amid
expectations of oversupply driven by planned release from the
Strategic Petroleum Reserve adding to monthly output from the
Organization of the Petroleum Exporting Countries and allies
(OPEC+), the bank said in a note.
Oil rebounded by almost 5% on Monday to $76 a barrel as some
investors viewed Friday's more than 10% slump in oil on concern
about the Omicron coronavirus variant as overdone.
But while the beginning of next year could see excess
supply, spare oil capacity was likely to be eroded by the end of
2022 as inventories draw down further from already low levels.
OPEC+ may not increase supply by 400,000 barrels per day
(bpd) since the group does not have the capacity to do so, nor
the incentive to oversupply the market, the bank said, adding
the market was expected to be more under-supplied in 2022 than
the International Energy Agency has suggested.
"Brent prices rising above recent highs again is probably
something from mid 2022 and beyond," the bank said, while
raising its third quarter Brent outlook to $90 a barrel from
The market could see a supply deficit in 2023 that would
deepen further, it added.
(Reporting by Seher Dareen and Arpan Varghese, editing by David