The Oil Manual: Full Circle – Focus Shifts Back to 2027 Surplus

Research evidence excerpt

The Oil Manual: Full Circle – Focus Shifts Back to 2027 Surplus

Global Idea

June 29, 2026 10:40 PM GMT

Morgan Stanley & Co. International plc+MThe Oil Manual Martijn Rats, CFA

Equity Analyst and Commodities Strategist

Full Circle – Focus Shifts Back Martijn.Rats@morganstanley.comCharlotte Firkins +44 20 7425-6618

Commodities Strategist

Charlotte.Firkins@morganstanley.com +44 20 7425-3866

to 2027 Surplus Amy Gower (Amy Sergeant), CFA

Amy.Gower1@morganstanley.com +44 20 7677-6937

What’s Changed

Energy

Energy From To

Europe

Industry View Attractive In-Line Industry View In-Line

The Strait is reopening faster than expected, yet the 'twin

solvers' of high US exports and low Chinese imports remain in Exhibit 2 : We revise our near-term Brent

forecasts lower, including for deeper into 2027

place. The result is a physical glut. As attention turns to 2027,

the market has come full circle – back to surplus. We introduce

the 'call on Hormuz', and lower 2027 forecasts.

Key Takeaways

Prices are signalling broad-based weakness. Front calendar spreads are in

contango and physical differentials across the Atlantic Basin have fallen to multi-

year lows

Previous research:

Along similar lines, the number of unsold cargoes has built further since our last

update and remains well above-normal - surprising, given such a large supply loss • The Oil Manual: "Let the Oil Flow" (15 June 2026)

To balance the market in 2027, flows through Hormuz only need to recover to 11- • The Oil Manual: Why is the Price of Oil Not

12 mb/d, or ~65% of the pre-conflict level, we estimate Higher? (11 May 2026)

• The Oil Manual: Schrodinger's Strait (27 Apr

Looking into 2027, our modelling assumption is that this will be exceeded, and

2026)

that observable stocks will build by 3 mb/d, likely weighing on prices