Morgan Stanley Morgan Stanley energy strategist Martijn Rats has a much more bullish view on the oil price than the Citi analyst I cited yesterday,
“Geopolitical risk related to the events in the Ukraine has introduced a premium in oil prices that will likely remain in coming months, which we had not incorporated so far. With that in mind, we increase our average 1Q forecast by $7.5/bbl to $95, and our 2Q forecast by $10/bbl to $110 in our base case scenario. Our bull case estimate for 2Q increases by $15 to $125/bbl… All the pipeline and tanker tracking data available to us suggests that, as of now, there is no noticeable disruption to the flow of oil from Russia… As previously highlighted, global oil inventories are already low and falling. Spare capacity is declining … small disruptions can still have large price impacts: As previously argued, we expect that oil prices eventually need to search for the level where at least some demand erosion kicks in. If there were to be an actual disruption to supply, the low price elasticity of oil demand means that this would probably cause a substantial price jump.”
“MS: “small disruptions can still have large price impacts [on crude]” – (research excerpt) Twitter