Morgan Stanley: 'The Path Of Least Resistance For Oil Is Lower'

Lackluster macro conditions, easing geopolitical tensions and bearish fundamentals are going to continue to weigh on oil prices for the next several months, Morgan Stanley commodities analyst Hussein Allidina says.

“The path of least resistance for oil is lower, particualrly with bearih catalysts continuing to emerge,” he said in a videotaped research note.

June West Texas Intermdiate crude contracts closed at $92.56 yesterday, erasing nearly six months of gains.

The disappointing April jobs report, which showed just 119K jobs created, proved particularly costly.

If OPEC keeps production at current levels, production will be well above normal, Allidina said. 

Here was the graph he used to support his argument:


Photo: Morgan Stanley

At current levels, supply would exceed production by 800,000 barrles per day through 2012, Allidina said.

Watch the whole video here.

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