Morgan Stanley: Adequate oil supply expected to continue, predicted Brent oil prices will drop to $60 in early next year.

Morgan Stanley analysts said on Tuesday that as Israel and Iran reached a ceasefire agreement, the geopolitical risks have decreased and the ample supply in the oil market is expected to continue, therefore Brent crude prices could drop to around $60 per barrel by early 2026. The bank wrote, "OPEC is gradually lifting its production cuts, and we still expect global oil supply to exceed demand by about 1.3 million barrels per day in 2026." At the same time, the bank also predicts that non-OPEC countries' oil supply will increase by 1 million barrels per day in 2025 and 2026, which is enough to meet the demand growth during that period. OPEC+ decided in May to increase oil production by 411,000 barrels per day in July, bringing the total production increase implemented or announced since April to 1.37 million barrels per day. It is expected that major member countries will approve another 411,000 barrels per day increase in production at a meeting this weekend, raising concerns about oversupply in the market. With a 411,000 barrels per day increase in August and another increase of the same scale in September, this will completely offset the voluntary production cuts of 2.2 million barrels per day by eight OPEC+ oil-producing countries, and is likely to cause a global market oversupply in the fourth quarter. Meanwhile, the threat of further tariff hikes by the United States has heightened this uncertainty. As several major trading partners are engaged in tense negotiations, hoping to reach an agreement with the Trump administration before July 9. By then, tariffs will be further increased from the current temporary 10% level. US Treasury Secretary Mnuchin warned that even with sincere negotiations from both sides, if the final deadline on July 9 approaches, relevant countries may still be notified of a significant increase in tariffs.