Market Overview

Morgan Stanley At Dubai Analyst Conference: Oil Stuck In $25-$45 Range

Morgan Stanley At Dubai Analyst Conference: Oil Stuck In $25-$45 Range

Crude oil prices have been on a tear since hitting 13-year lows near $26/bbl back in February. However, with WTI now trading above $42/bbl, Morgan Stanley sees very little upside remaining for now.

At the Dubai Commodities Conference, analyst Adam Longston argued that the recent oil rally was driven more by technicals than by underlying improvement in the oil market.

“In an oversupplied market, there are few fundamental factors to support pricing,” Longston explains. “Momentum, FX, macro trends and headlines are the primary factors along with hedging flows—led by macro/quant.”

Related Link: Fallout From The Disastrous Doha Oil Producers Meeting

As long as global markets remain oversupplied, Morgan Stanley expects WTI to trade within the $25-45/bbl range. One of the major pressures that oil prices begin to face in the $40 range is hedging by underhedged producers.

While most oil bulls believe the oversupply will soon be corrected by a drop in global production, Longston says it’s not always that simple. He warns investors that producers don’t always behave rationally.

In addition, the long lead times of 5-7 years for large international projects means that, for the next several years, supply will continue to be boosted by international projects that began during the 2006-2014 boom.

So far in 2016 the United States Oil Fund LP (ETF) (NYSE: USO) is down 5 percent.

Disclosure: the author holds no position in the stocks mentioned.

Posted-In: Adam Longston Morgan StanleyAnalyst Color Specialty ETFs Commodities Markets Analyst Ratings ETFs Best of Benzinga


Related Articles (USO)

View Comments and Join the Discussion!

Latest Ratings

CASADA DavidsonInitiates Coverage On12.0
DPLOMorgan StanleyMaintains8.0
QLYSSummit Insights GroupDowngrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Trader Essentials
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Forget This Quarter, BMO More Concerned About Microsoft's June Results

Wells Fargo Appoints Kristi Mitchem As Head For Asset Management