Oil prices have quickly climbed to levels that raise the risk of price falls as demand is fragile, Morgan Stanley said on Monday, as benchmark crude hit its highest in three months, APA reports citing Reuters.
Oil climbed on Monday after major producers agreed to extend a deal on record output cuts to the end of July and as China’s crude imports hit an all-time high in May.
The bank said its base case expectation remained that oil markets will be progressively under-supplied in the second half of this year and inventories will shrink in the fourth quarter and first quarter next year.
But it said in a note the rally “appears mostly supply- rather than demand-driven, and it is questionable how strong refinery runs can increase against this backdrop”.
Refining margins are historically low and inventories of oil products remain elevated relative to crude oil inventories, suggesting the demand recovery is relatively fragile.
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