Morgan Stanley raised its Brent forecasts to $105 a barrel for 4Q26 and $100 for 1Q27, arguing that costly freight favours short-haul crude. The bank says Persian Gulf exports are back within 10% of prewar levels, yet Brent still trades above $100.
Morgan Stanley has raised its Brent crude forecasts for a second time in less than two months, saying unusually expensive freight gives the North Sea benchmark a specific advantage over competing crudes.
The bank now expects Brent to average $105 a barrel in the fourth quarter of 2026, up from $100, and $100 in the first quarter of 2027, up from $95. Its analysts note that Persian Gulf crude exports have recovered to within 10% of prewar levels, yet Brent continues to trade above $100.
Freight favours short-haul barrels
Morgan Stanley said supply, inventories and geopolitical risk all play a part in keeping prices high, but one factor works in Brent's favour in particular. Brent is a short-haul crude, delivered mainly over short distances into European markets, at a time when shipping costs are well above normal.
Long-haul alternatives have had to adjust instead. The bank said crudes from Brazil and West Africa, along with US West Texas Intermediate, shipped into Northwest Europe have seen their free-on-board prices fall relative to Brent as sellers partly absorb the higher cost of freight.
Second upgrade since August
The latest revision follows a sharp upgrade in late August, when the bank lifted its Brent forecasts from a flat $75 assumption to $90 for the third quarter of 2026, $100 for the fourth quarter, $95 for the first quarter of 2027 and $90 for the second quarter. At that stage, Morgan Stanley pointed to a slower than expected recovery in Middle East supply stretching well into 2027 and steep declines in both oil-on-water and onshore inventories, including in China.
The new note shifts the emphasis. With Gulf exports now largely restored, the bank's case leans less on missing barrels and more on the cost and logistics of moving oil.
The outlook still depends heavily on how the Middle East conflict develops. Freight costs and shipping security through the Gulf are now central to whether Brent can hold above $100 into next year.
Source: Investinglive
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