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    Is oil headed to $90? Morgan Stanley’s global oil strategist thinks so  

    Is oil headed to $90? Morgan Stanley’s global oil strategist thinks so  

    Is oil headed to $90? Morgan Stanley’s global oil strategist thinks so  
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    By CNBC-TV18  IST (Published)

    Morgan Stanley’s global oil strategist, Martijn Rats, said that even though US shale output is surging, demand for jet fuel, diesel oil and other middle distillates—crude oil and crudes that look like Brent— could push oil prices higher.
    While geopolitical events and returning demand have helped oil prices creep higher over the last year, another aspect of oil supply and demand has been missed by many investors, according to him. Namely, the mismatch between the supply of light-grade shale oil available and demand for heavier oil needed to produce middle distillates, including jet fuel, kerosene, diesel and heating oil, he was quoted as saying in an article that was published on the Morgan Stanely website.
    Collectively, middle distillates power ships, trucks, planes, trains, cranes, bulldozers and heavy machinery. Middle distillates are the fuel of emerging market industrial growth and international trade.”
    This rise in global demand coupled with other contributing factors—including regulations from the International Maritime Organisation (IMO) that will limit use of high sulphur oil by shipping vessels—suggests that Brent oil prices can keep climbing, possibly reaching $90 a barrel by early 2020, he wrote.
    Supply and Demand More Nuanced
    To arrive at their recent outlook for oil, Rats and his team looked beyond the traditional supply/demand balance. Instead, they analysed oil as a refiner would, asking the question “Can refiners make the products we need from the oil that is available?”
    Their conclusion: Middle distillate inventories in countries that report weekly are already at the bottom of their five-year range. Moreover, the new supply of oil is increasingly light and therefore results in lower yields for middle distillate product. In other words, more shale oil is needed to produce a refined product.
    Read the complete article here.
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