Analysts at Morgan Stanley in a report for clients released earlier Monday tried to match up production from certain OPEC+ members with the unwinding of 2.2 million b/d of cuts.
The aggregate production quota is currently about 1 million b/d higher than in March, but the bank's analysis noted that it is hard to see much of an increase in production from what it calls the Group of 8, the OPEC+ producers participating in the 2.2 million b/d voluntary cut.
Analysts at the bank acknowledged that oil market data can be very noisy and is often revised. While they rely on six different data providers to track OPEC production estimates, the gap between the highest and lowest output is a wide 700,000 b/d.
"Also, these estimates all come out with a lag. This means that so far, our usual data sources provide limited insight into the critical question whether OPEC production has actually risen by now," the report said.
Morgan Stanley has developed a proxy that combines several high-frequency data sets. After oil is produced, there are several ways it can go: direct to refineries; exported by sea or pipeline; put into storage; or used directly for power burn for example, the bank said.
For refinery operations, the bank assumes a 90% utilization rate. The bank noted, however, that countries like Iraq and Oman have seen refining struggles of late so analysts use a lower utilization rate. On the other hand, Algeria has higher utilization according to data from Sonatrach that suggests strong refinery runs.
The bank also uses tanker tracking services for exports but noted a country like the United Arab Emirates also imports, so it uses that to produce a daily net export rate. Meanwhile, pipeline exports currently do not occur in UAE, Kuwait, Oman or Iraq. But Russia, Kazakhstan, Saudi Arabia and Algeria all export via pipeline. There is no daily visibility, but monthly data shows the pipeline rates are steady.
Satellite imagery is used for daily inventory movements. The bank noted that this is only oil stored above ground in floating roof facilities but represents about 75% of onshore crude oil inventories.
Countries like Saudi Arabia, Iraq and Algeria use crude oil for power generation. According to the Joint Organization Data Initiative, the direct use in Iraq and Algeria is small, but in Saudi Arabia in the summer can top 700,000 b/d.
The bank acknowledged that there are plenty of limitations and sources of uncertainty, and that this is largely a proxy and not a precise instrument based on observable data. Compared to estimates from the International Energy Agency, Morgan Stanley's estimate is on average 0.6% lower, the bank noted.
Based on its proxy and methodology, it is hard to see an actual increase in production despite announced quota increases of 1 million b/d between March and June, the bank said.
Even with no observed production increases, the bank is sticking to its price forecast of $57.50/bbl Brent in the second half of this year and $55/bbl in the first half 2026.
The bank still assumes production increases of about 420,000 b/d over the next three months (between June and September) and half will come from Saudi Arabia.
The bank said it sees no reason to revise its supply-demand balances as of yet. Morgan Stanley still sees a surplus of 0.8 mb/d by the fourth quarter 2025 and 1.3 million b/d in 2026.
"Given that it is still early days in the unwinding of the production cuts, we do not revise our assumptions at this stage. Still, if there were to be no 'Group of 8' supply growth at all, our estimated 4Q25 and 2026 surpluses would fall to 0.3 and 0.5 mb/d respectively - still a surplus, but far less," the report concluded.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
--Reporting by Denton Cinquegrana, dcinquegrana@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com
(END) Dow Jones Newswires
06-09-25 1613ET
