Morgan Stanley Warns Oil Buffers Could Deplete Before Hormuz Reopening

Global oil market buffers that have prevented prices from soaring could run out before the Strait of Hormuz reopens, putting the market in a "race against time," according to Morgan Stanley. Reduced crude imports into China and soaring U.S. exports have so far partly offset the massive supply disruption from the chokepoint's closure, the investment bank said.

However, Morgan Stanley analysts warned that if the Strait remains closed through the end of June, these buffers will be exhausted, potentially causing Brent Crude prices to spike. The bank stated that a reopening in June, with U.S. and Chinese buffers still partly intact, is its base case. If the closure runs into late June or July, "Brent flat price has to do work it has so far been able to avoid."

Despite the warning, Morgan Stanley kept its price forecasts unchanged, expecting physical Dated Brent to average $110 per barrel in Q2 2026, $100 in Q3, and $90 in Q4. The analysts noted, however, that if the closure lasts longer than U.S. and Chinese trade flows can sustain, Dated Brent could surge to as high as $150 per barrel. The prospect of a near-term reopening remained distant as of Monday morning, after U.S. President Donald Trump rejected Iran's response to a U.S.-drafted peace proposal, OilPrice.com reported.

The warning follows a note from Goldman Sachs last week, which said global oil inventories are crashing and approaching an eight-year low. Goldman Sachs analysts wrote, "While global oil stocks are ‘unlikely to hit minimum operational levels this summer, the speed of depletion and supply losses in some regions and products is concerning.’"

Amid this volatile global backdrop, a major domestic research initiative targeting the Bakken formation is moving forward. A $157 million oil research effort aimed at boosting North Dakota production is expected to kick into high gear later this year, according to Bing News. A prominent research center in North Dakota will play a lead role in the work to unlock the next stage of oil production from the Bakken.

In other global energy investment news, Spanish utility Iberdrola plans to invest $10 billion in Brazil through 2030, Rigzone reported. The company said the new plan almost doubles the 27.5 billion reais invested over the last five-year period (2021-2025) and "ushers in a new phase of growth based on the expansion, modernization and digitalization of electricity infrastructure."