The freight argument points to Brent holding a firmer premium over long-haul grades, including WTI delivered into Europe, for as long as shipping stays expensive. Refiners in Northwest Europe benefit from cheaper delivered barrels from Brazil, West Africa and the US, while producers of those grades absorb the cost through weaker differentials. The main risk to the call is a sustained fall in freight rates, for example from a durable normalisation of Hormuz traffic, which would remove the Brent-specific support even if overall supply stays tight. Traders should watch tanker rates and physical differentials as closely as the flat price.
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Earlier:
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Morgan Stanley says Brent’s $100-plus price is no longer only about missing barrels: the cost of shipping them is doing much of the work.
Summary:
- Morgan Stanley raised its Brent forecast to $105 a barrel for 4Q26 from $100, and to $100 for 1Q27 from $95
- The bank notes Persian Gulf crude exports are back within 10% of prewar levels, yet Brent remains above $100
- It says supply, inventories and geopolitical risk all matter, but Brent gains specifically from being a short-haul crude while freight is unusually costly
- Long-haul grades from Brazil, West Africa and US WTI shipped to Northwest Europe have seen their prices fall against Brent to partly absorb higher shipping costs
- The move follows an August upgrade that lifted the 4Q26 forecast to $100 from $75, citing a slow Middle East supply recovery and falling inventories
Morgan Stanley has raised its Brent crude forecasts for a second time in less than two months, arguing that unusually expensive freight is giving 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 their prewar levels, yet Brent continues to trade above $100.
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.
The latest revision builds on 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, a market in deficit through the turn of the year, and steep declines in both oil-on-water and onshore inventories, including in China. It also flagged a record gap between crude and refined products, with gasoil trading far above Brent.
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, a dynamic that particularly benefits Brent.
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.
This article was written by Eamonn Sheridan at investinglive.com.