Brent crude to rise to $50/bbl in 2021 on inflation, weaker dollar – Morgan Stanley

Morgan Stanley expects Brent crude prices to climb to $50 per barrel by the second half of 2021 supported by a weaker dollar and higher inflation, it said in a note on Wednesday.

“Unprecedented expansion of monetary aggregates has weakened the U.S. dollar and put upward pressure on inflation expectations,” the bank said.Morgan Stanley also raised its price forecast for West Texas Intermediate to $47.5 per barrel for the third quarter of 2021.

The bank also sees a steady undersupply throughout 2021 and expects inventories to largely normalise by the end of next year as the global economy recovers.“We have delayed our assumption for when demand crosses over to its pre-COVID19 level from end-2021 to mid-2022, but this implies recovery nonetheless,” Morgan Stanley added.

However, in the short-term oil market fundamentals look soft with fragile demand recovery, high inventories and spare capacity and low refining margins, the bank said.Both major oil benchmarks are trading close to three-month lows as the global health crisis continues to flare, threatening to slow a global economic recovery and reduce demand for fuels from aviation gas to diesel.