Morgan Stanley Morgan Stanley (MS) just poured some cold water on oil prices. The bank cut its oil price forecasts for this year and next, saying that tankers are moving through the Strait of Hormuz much faster than anyone expected.

A team led by strategist Martijn Rats lowered its fourth-quarter Brent crude forecast to $75 a barrel from $80, and slashed its end-2027 target to $70 from $80, according to a client note cited by MarketWatch on Tuesday.

The reason? Oil flows are improving. Last Thursday, 35 outbound oil and gas tankers transited the contested waterway — that's back to pre-conflict levels. Among them were five very large crude carriers (VLCCs), capable of hauling a combined 10 million barrels of crude for export. On the same day, 15 tankers, including five VLCCs, moved inbound.

The analysts also pointed to what they call the "twin solvers" — high U.S. oil exports and depressed net imports into China — which are still shielding the rest of the oil market from nearly 10 million barrels per day of tightness.

As Middle East exports bounce back, the supply shortage is easing. That's creating a surplus in the Brent and Dubai crude markets, leaving an unusually high number of cargoes unsold. Morgan Stanley now estimates a 4.8 million barrels per day surplus for next year, up from a pre-war surplus of 2 to 3 million bpd.

Shippers Doubt Quick Hormuz Return

But not everyone is convinced the Strait is back to normal. Morgan Stanley's upbeat view contrasts sharply with the cautious stance of major shipping companies. On Sunday, NYK Line CEO Takaya Soga said traffic at the critical waterway will be less than half of prewar levels for several months, even if the U.S.-Iran peace deal holds. "Operations are still nowhere near returning to conditions before the closure of the Strait of Hormuz," he said.

Japan's Mitsui O.S.K. Lines echoed that sentiment, saying shipping companies are expected to keep avoiding the Strait until the route is proven safe.

Meanwhile, oil prices are still above $71 a barrel, and President Donald Trump has been leaning on gasoline retailers to lower pump prices to $2.50 a gallon, warning of "big problems" if they don't.

At the time of writing, Brent crude was trading 0.64% higher at $73.79 per barrel, while WTI futures were up 0.76% at $71.28. The average U.S. gas price stands at $3.84 per gallon, according to AAA.

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