Morgan Stanley: Likely Iran Deal Creates Downside Risk For Oil

The deadline on a nuclear agreement with Iran is March 31, with any announced deal becoming a short-term negative for oil prices, according to Morgan Stanley. The opposite would produce the opposite result, though Morgan Stanley sees a deal as increasingly likely based on press reports and the analysts' own channel checks.

The United States Oil Fund LP USO was up 3 percent Monday after experiencing its first monthly gain in more than seven months during February.

Along with the deal, Morgan Stanley said that oil prices face seasonal weakness in Q2. The analysts noted that they would expect the price of Brent crude to be particularly pressured following its more than 35 percent increase off of January lows.

The actual impact of the Iranian oil will be minimal, particularly in the near term, Morgan Stanley argued. If no deal is reached, the Brent crude market should be supported.

Image credit: Sonia Sevilla, Wikimedia