Morgan Stanley cuts Q1 2022 Brent oil forecast on Omicron risks | Reuters

Morgan Stanley cuts Q1 2022 Brent oil forecast on Omicron risks | Reuters

Morgan Stanley on Monday cut its first quarter 2022 Brent crude price forecast to $82.50 per barrel from $95 on market expectations that the Omicron coronavirus variant could turn into a major headwind for oil demand.

The market appears to be pricing in the possibility that the new variant could prompt restrictions and cut oil demand, amid expectations of oversupply driven by planned release from the Strategic Petroleum Reserve adding to monthly output from the Organization of the Petroleum Exporting Countries and allies (OPEC+), the bank said in a note.

Oil rebounded by almost 5% on Monday to $76 a barrel as some investors viewed Friday's more than 10% slump in oil on concern about the Omicron coronavirus variant as overdone. read more

But while the beginning of next year could see excess supply, spare oil capacity was likely to be eroded by the end of 2022 as inventories draw down further from already low levels.