摩根士丹利-石油手册：全面复苏之路放缓上调布伦特油价预测-The Oil Manual：Slower Road to Full Recovery;Raising Brent Forecasts-20260823

RESEARCH

MorganStanley

August23,202604:00PMGMT

TheOilManual

SlowerRoadtoFullRecovery;RaisingBrentForecasts

Supplyistightening,inventoriesaredrawingandtheSPRbufferisdiminishing.Wenowforecastamoredrawn-outMiddleEastsupplyrecovery,whichleavesthemarketindeficitthroughout4Qand1Q.Withthat,wereviseourBrentforecastshigher,

peakingat$100/bin4Q

KeyTakeaways

■Crudeistightening.Recentweekshaveseenoneofthesharpestdeclinesinoil-on-water,whilstonshoreinventoriesaredecliningaswell,includinginChina

■Areductioninsupplyisdrivingthis,mostnotablyfromtheMiddleEastwhereseveraldatasourcesputaggregateexportsbackatMarch/Aprillevels

■Lookingahead,weslowourassumptionforMiddleEastsupplyrecovery,whichnowtakeswellinto2027onournewestimates

Inthemeantime,SPRsupplyhasalreadyslowedandislikelytoendafterSept;Chinesecrudebuyingisnolongerdeteriorating,ifanything,thisraisesthescopeforittopickup

■Fornow,constraintsintherefiningsystemareLimitingcrudedemand;still,withdieselalreadyat$175/b,weexpectBrenttorallyfrom$93

Exhibit1:CrudeoilexportsfromtheMiddleEasthavefallen,butaddingrecentdeclinesfromtheUS(lessSPR)andRussia(terminalattacks)showsthefull

picture.

Iran,Russia,SaudiArabiaandtheUnitedStatesSeabornecrude/condensateexports,28-dayaverage(mb/d)

-2026-2025-2024-Average2022-25Range2022-25

Note:RussiaincludesKazakhgradesloadingatRussianports.

Source:Vortexa,MorganStanleyResearch

GLOBALIDEA

MORGANSTANLEY&CO.INTERNATIONALPLC+MartijnRats,CFA

+44207425-6618

EquityAnalystandCommoditiesStrategistMartijn.Rats@morganstanley.oom

CharlotteFirkinsCommoditiesStategist

+44207425-3866

+44207677-6937

ChanloteFrkins@morganstaneycom

AmyGower(AmySergeant),CFACommoditiesStategist

Amy.Gower1@morganstanleycom

Exhibit2:Withatighterbalanceahead,weraiseour4Qforecastto$100/b

DatedBrentpriceforecasts

($/bbl)

3Q26

4Q26

1Q27

2Q27

3Q27

4Q27

New

90.0

100.0

95.0

90.0

80.0

75.0

Previous

75.0

75.0

75.0

75.0

70.0

70.0

Change

15.0

25.0

20.0

15.0

10.0

5.0

Source:MorganStanleyResearch

Previousresearch:

·TheOilManual:CheapCrude,DearDiesel-WhyCrackSpreadsAreSoHigh(19July2026)

·TheOilManual:FullCircle-FocusShiftsBackto2027Surplus(29Jun2026)

·TheOilManual:LettheOilFlow(15Jun2026)

·TheOilManual:SPRTracker:HowMuchHasBeenReleased?What'sNext?(28May2026)

·TheOilManual:WhyisthePriceofOilNotHigher?(11May2026)

·TheOilManual:USGasoline:TightBalance;FairValueForNow(4May2026)

·TheOilManual:Schrodinger'sStrait(27Apr2026)

·TheOilManual:"Paper'vs'Physical'Oil-AShortPrimer(7Apr2026)

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.SaffiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

MorganStanley|RESEARCHGLOBALIDEA

SlowerRoadtoFullRecovery

Higherpricesafteravolatilesummer

Exhibit3:Ex-Chinaoilinventoriesareatmulti-yearlowsandfalling

GlobaloilinventoriesoutsideChina

Crudeoilandrefinedproduct,onland,atseaandintransit(bnbbl)-2019-2026-2025-2026

7.2

6.8-

JanAprOct

Souree:Vortexa,IEA,EIAPJKPAJ.IE,MorganStanleyResearch

Oilpriceshavebeenparticularlyvolatilethissummer.Thefront-monthBrentfuturestilltraded>$110/blinmid-May,butfelltoalow$71/blbyearlyJune.Threeweekslater,Brenthadrecoveredto～$100/bbl,onlytofallbackto$79/bbltwoweeksafterthat.Theswingshavebeenwild

Overthelasttwoweeks,however,thetrendhasbeenhigheragain,withBrenttradingat$92/bblatthetimeofwriting.Wewouldattributethistotwofactors:first,adeclineinsupplyresultinginsteadyinventorydraws,andsecond,agrowingsensethattheMiddleEastsupplydisruptioncanlastlonger.Thesearealsothetopicsofthisnote.

AlthoughBrentflatpricehasrisen,notallpriceindicatorsinthecrudeoilmarkettellauniformstoryoftightening.TheBrentM1-M2calendarspreadshavenotablynotrisenmuchoverthelasttwoweeks,theDFLandCFDcurveshavenotsteepened,andNorthSeadifferentialsarenotsignallingatighteningphysicalmarket.ThesamecanbesaidaboutWTI.Intheshortterm,itappearstheAtlanticbasinisstillwellsupplied.

Instead,thestrengthisconcentratedintheDubaimarket-theDubaiM1-M2spreadhasralliedfrom$1.72/blto$3.24/blsince4August,anincreaseof$1.52/bl,comparedto

$0.37/bland-$0.05/blforBrentandWTI,respectively.ThecashDubaipremiumisbackto$11.50/bl;notthe'blowout'valueitreachedinMarch,butstronginahistoricalcontext

nonetheless.

Exhibit4:Interestingly,theBrentM2-3spreadisrallyingmorethantheM1-2spreadasthemarketstilldealswithanoverhangbutanticipatestightness

Brentcalendarspreads

(S/bbl)

-M1-M2spread-M2-M3spread

Exhibit5:Judgingbycalendarspreads,thephysicalmarkettightnessismostlyvisibleintheDubaimarket,sofarlessin

BrentorWTI

CalendarspreadsMo1vsMo2

($/bbl)

Theimmediatedriver:inventories,onlandandatsea,aredrawing

Theuptrendincrudepricesoverthelasttwoweeksissupportedbygenuineandsizeableinventorydraws,bothonlandandatsea.Sure,theweeklyDOEfigureshaveshownrisinginventoriesintheUSinthelasttwoweeks,butthishasbeenoffsetbydrawselsewhere.

Thedeclineofcrudeoil-on-waterhasbeenparticularlynotable,fallingfrom1.38bn

barrelson13Julyto1.21bnbarrelscurrently,accordingtoVortexadata.Thisisadeclineof168millionbarrelsamountingtoarateof4.7millionbarrelsperday.Withinthisperiod

MorganStanley|RESEARCHGLOBALIDEA

wasafour-weekstretch,ending16August,whencrudeoil-on-waterdeclinedatarateof

5.3mb/d-thefastestfour-weekdeclineinthehistoryofthistimeseries,andstillrunningatasimilarpacethroughthemostrecentdata.

Exhibit6:Albeitcomingfromahighlevel,crudeoil-on-waterhasdeclinedatitssharpestrateinthelastfourweekssinceourdatabegan

Global

Crude/condensateonthewater-dailyvalue(mb)

-2026-2025-2024-Average2022-25■Range2022-25

1350-

1300-

1250-

1200-

1150-

1100-

1050

JanAprMayJunJulAug

Note:includesintra-countrycargomovements.

Source:Vortexa,MorganStanleyResearch

Exhibit7:AftertheMOU,globalcrudeoilarrivalsrecoveredtoa'normal'

~43mb/d...

Global

Seabornecrude/condensateimports,28-dayaverage(mbid)

Exhibit8:...butnewcrudeoilexportshavealreadydeclined,backto~37mb/d

Global

Seabornecrude/condensateexports,28-dayaverage(mb/d)

-2026-2025-2024-Average2022-25■Range2022-25

loedngandduchapinginhesamecouéy.

Evenmorestriking,however,iswhathappenswhenthosebarrelsarrived.Ourinventorytrackingpointstowardsa38mbdeclineinonshoreinventoriesoverthesame4-week

period(and49mbifweweretoincluderefinedproducts).Soevenascrude-on-waterdeclinedat~5mb/d,observablecrude-on-landstilldrewby~1.4mb/d.Thatisa

constructivesign:thearrivingbarrelswereabsorbedbytherefiningsystem,ratherthanrebuildonshorestocks.

Thisislikelytocontinuenearterm.Exhibit7andExhibit8showthedynamicbehindthedeclineinoil-on-water-seabornecrudeoilarrivalshavebeenhealthyat~43mb/d,butnewexportshavedeclinedto~37.5mb/doverthelastfourweeks.Thatexportfigureislow;itsitsatonlythe4thpercentileofthelast3years.

Arrivalsfollowexportswithalag,soseabornecrudeimportsarelikelytodeclinein

comingweeks.Ifland-basedinventorieswerealreadydecliningwith43mb/dofseaborne

MORGANSTANLEYRESEARCH

4

GlobalIdea

arrivals,theyarelikelytocontinuetodosowithonly~37mb/dofarrivals.

MorganStanley|RESEARCHGLOBALIDEA

Theglobalaggregatesarerelevant,buttheydonotrevealtheregionaldifferentiation,

whichisalsonoteworthy.Thedeclineinonshoreinventorieshasrecentlybeen

concentratedEastofSuez,andparticularlyinChina.ObservableinventoriesintheAtlanticBasinhavebeenbroadlystableinthelastfewweeks(intheUS,commercialinventory

buildshavebeenoffsetbySPRdraw).ThisisconsistentwiththeobservationthatpricesintheDubaimarkethavebeensignallingmoretightnessthaninBrentandWTI.

Exhibit9:OnshorecrudeoilinventoriesaredrawingsteadilyoutsideChina..

GlobalcrudeoilinventoriesoutsideChina

Crudeoilandcondensate,onlandonly,inclstrategicreserves(bnbbl)-2019-2026-2025-2026

..

.MogaStaniey

Exhibit10:...andtheyarerecentlydrawinginChinatoo

ObservablecrudeoilinventoriesinChina

Onland(mlnbbl)

2022-2023-2024-2025-2026

Souce:Vortonn,MorganStmy

Thereason:MiddleEastexportsaredownagain

Inturn,thereasonforthedeclineininventorieshasbeenadeteriorationinsupply,particularlyfromtheMiddleEast.

FollowingtheMemorandumofUnderstandingbetweentheUSandIraninmid-June,crudeoilexportsviatheStraitofHormuzbrieflyincreasedto~15mb/d-closetothepre-

conflictlevel.Thedailydataisvolatile,butVortexadataputstherecentrun-rateat~6mb/dinthelasttwoweeks.

Thatismorethanthe2-3mb/dthatwasflowingoutoftheStraitduringMarch/April,soflowsthroughtheStraitaresubstantiallyimprovedcomparedtothatperiod.However,atthattime,SaudiArabiadivertedsubstantialvolumestoitsYanbuterminalontheWest

sideofthecountry.Inthatperiod,crudeoilexportsviatheRedSeaweretypicallyrunningat4-4.5mb/d.FollowingrecentHouthithreatsontankerspassingtheBabelMandeb,theobservabledatacurrentlyputsthisatjust~1.5mb/d.

TheeffectisvisibleinExhibit11:accordingtodatafrombothVortexaandPetro-Logistics,totalcrudeoilexportsfromtheregionhavefallenbackagain,andarecurrentlyclosetothelevelsseeninMarchandApril.

MORGANSTANLEYRESEARCH5

MorganStanley|RESEARCHGLOBALIDEA

6

Exhibit11:WithflowsviatheRedSeadown,andnoexportsfromIran,totalcrudeoilsuppliesfromtheregionarebacktotheMarch/Aprillevels,accordingtobothPetro-LogisticsandVortexadata

Crudeoilexports

KeyproducersintheMiddleEast;updatedweekly;dataforweekending20Aug2026(mb/d)

-Vortexa-Petro-Logistics

Note:chartshowstotalcrudeoilexportsfromSaudiArabia,UAE,Kuwait,IranandIraq

Source:Vortexa,Petro-Logistics,MorganStanleyResearch

Needlesstosay,theseestimateshaveerrorrangesaroundthem.Muchofthisisbasedontankertracking,andonmanyoccasions,transitsviaHormuzortheBabel-Mandebare

pickedupbydataprovidersonlyseveraldaysaftertheytookplace.Thatsaid,every

tankereventuallyappears,whichmeansthatthevastmajorityoftransitscaneventuallybemapped.Thatsuggeststhemostrecentdatashouldbetreatedwithsomedegreeofcaution,butolderdata(i.e.fromafewweeksago)islikelymorereliable.

SincetheHormuzcrisisbrokeout,weeklyestimatesfromPetro-LogisticsforexportsfromSaudiArabia,UAE,Kuwait,IranandIraqinaggregatehavehadamedianpositiverevisionof~600kb/doverthefourweeksafterthefirstestimatewaspublished(with75%of

estimatesrevisedpositivelyand25%revisednegatively).Ifweapplythattothechart

above,itcouldsuggestthatthedeclineshowninrecentweeksmaynotbequiteassteep.However,ifweaddback600kb/dtoanticipatetherevision,itwouldnotchangethe

conclusion.

TheMiddleEastisthemaindriverofthistightening,butasshowninExhibit12andExhibit13,crudesupplyfrombothRussiaandtheUStotherestoftheworldhasalsodeclinedsharplyrecently-backtotheir'normallevels.

MorganStanley|RESEARCHGLOBALIDEA

MORGANSTANLEYRESEARCH

Exhibit14:TheUSSPRisbacktoislowestlevelsinceearly1983

USStrategicPetroleumReserves(millionbarrels)

700

600

500-

400

300-

1990200020102020

Source:EIA/DOE,MorganStanleyResearch

Exhibit12:Afterasharpriseforseveralmonths,Russia'scrudeoilexportshavefallensharply,backtoyear-agolevel...Russia

Exhibit13:...andthesameistrueforexportsfromtheUS,partlyduetoSPRreleasescomingtoanend

UnitedStates

Seabornenetexportsofcrudeoilandcondensate(30-daymovingavg:mb/d)

Souce:Voton,MogamnStmiayFesearch

Thebackdrop:SPRbuffersaredryingup;Chinabuyingnolongerdeteriorating

Whilstthesupplyofcrudehasdeterioratedandinventoriesarenowlowbyhistorical

standards,twootherbuffersarecomingtoanendandareunlikelytobetheincremental'solvers'theywerebefore:

Strategicreserves

ThetailwindfromglobalSPRsisfading.WeestimatethatSPRreleasesadded~2.5mb/dtoglobaloilsupplyinMarchandApril,butthishasbeenonasteadydownwardspathsince-seeExhibit15.

TheUS,whichhasdonemostoftheactualdrawing,isrunninglow:commercial-plus-SPRcrudefellto298.7mbon7August,thefirstsub-300mbreadingsinceFebruary1983,andtheweeklydrawhasalreadyslowedfrom~9mbinMayto3-6mbnow.Partofthat

slowdownisnotachoice.AJunereportfromtheUSGovernmentAccountabilityOfficefoundthatclosetoaquarteroftheSPR'scrudecannotphysicallybereleasedatall,sothereservehaslessheadroomthantheheadlinenumberimplies.

TheothermajorcontributortoSPRreleaseswasJapan.However,Japanisnowflippingfromsellertobuyer:havingcompleteditsrelease,Japan'stradeministryproposedon7AugustrestockingtotheIEA's90-daycoverstandardasearlyasfiscal2026-27.

BasedonplannedSPRreleases,westillsee~0.5mb/dreleasedinAugustand~0.2mb/dinSeptember,butdonotanticipatematerialfurtherreleases.Inshort,thestrategic-stockoffsettothephysicalshortfallisrunningout.

8

MorganStanley|RESEARCHGLOBALIDEA

Exhibit15:Aftersupplying2-2.5mb/dinMarch/April,SPRreleaseshavealreadycomedownsharply;currentplanssuggestnofurtherreleasesafterSeptember

Globastrategicstockdrawsbysource,Mar-Sep2026(mb/month)

Non-USrowsre-anchoredtoEAcountylevelgovermentsockdata.Thereleasebeganamontlater,andwasfarmoreUS/Japanconcentrated,thanpreviouslysinated

MarAQrMayJuOct

o77e-20

peinUisIK91amnidpsaontrponteasCOsESo

NemuremndaichadeFiac13mb

wvrcerfned

stochaa

WITHDPRAMmuranNinsoty-U0bgKatgiowemssetm,sotitbosksnetansapparntheianIiEsA,gaondnoseieitngandufelmda-03mBbohLT)muj-02,Pdnd00DECDEvepepoieine

jum02mbbonenardtachaedadee.

Chinabuying

AnothermajorsolverthathaspreventedfurthertighteningoftheoilmarkethasbeenasharpreductioninimportsintoChina.China'sseabornecrudeimportsaretypically10-11mb/d,butforabriefperiod,thisfellaslowas5mb/d,providingrelieffortherestoftheglobalcrudemarket.

AftertheMOUinJune,around100mbofpent-upoilbehindtheStraitofHormuzwasabletosailout,andpartofthisheadedforChina.Thishasallowedseabornecrudeoil

importstoreboundto~8mb/d.However,wewouldarguethatthishasbeenmore'push'than'pull.

RatherthantrackingtankerswhentheyarriveinChina,wecanalsotrackthesametankerswhentheyleavetheirportofexport,headingtowardsChina.AsshowninExhibit16,thatvolumehasalreadyrolledoverandhasfallenbackto~6mb/d.Thatsuggestsbuying

interestfromChinahasremainedsubdued.

AsimilarconclusioncanbedrawnfromExhibit17.ThisshowstheactivityofChinese

playersinthespotmarket.Tobespecific,thistracksthecumulativeamountofcrudeoilboughtbyChineseplayersforaspecificdeliverymonth,upuntilspecificdatesrelativetothatdeliverymonth.ItshowshowChina'sspotimports'firmup'overtheweeksaheadofeachdeliverymonth.

Broadlyspeaking,Chineseplayerstypicallycontracted~6mb/dinthespotmarketbeforetheHormuzcrisis.SinceApril,thisiscloserto4mb/d-consistentwiththeimportdeclinewe'veseen.However,thedeclinesinspotpurchasesappeartohavecometoahalt;dataforAug,SepandOctissofarconsistentwithastabilisationofimports,albeitatalow

level.

IfChinesecrudebuyinghasindeedfoundafloor,thebalanceofrisksfromChinashiftstotheupside.Itsuggeststhattheglobal-ex-Chinadeficitcannolongerbesolvedbyeven-

MorganStanley

RESEARCHGLOBALIDEA

lowerimportsintoChina,andifChina'simportweretoeverpickup,theglobal-ex-Chinadeficitwouldbecomelarger.

Exhibit16:NewcrudeoilshipmentsdestinedforChinahaverecentlyrolledover,butfurtherdeclinesareunlikely,inourview

China

NewcrudeoilloadingsdestinatedforChina(mb/d)

Exhibit17:China'sactivityinthespotmarketalsosuggestslow-but-stablebuyinginterest

Chinacrudedealstracking

Knowncrudesupplyagreements,relativetolastdayofdeliverymonth(mb/d)

DaystomeendofthedeliverymonthSoucn:Argos,MerganShanioyResarch

Thecatch:notjustsupply;lowrefineryrunslimitingcrudedemand

Sofar,thisnotehasfocusedonthesupplyside.Butpartofwhycrudehasnottightenedfurtheristhatdemandfromrefinershasalsosoftened.Therearethreemainreasonsforthis:

·Russiarefinerydamagefromdronestrikes:RepeatedUkrainiandronestrikeshaveknockedkeyRussianrefineriesofflineortoreducedrates.Bynow,closeto

3.5mb/dofRussia'srefiningcapacityisshutin.

·StraitofHormuzdisruptions:Severalmb/dofrefiningcapacityLocatedbehind

theStraitisnowofflineasthoserefineriescannotexporttheirproducts.In

addition,severalrefineriesaredamaged,includingSaudiArabia'sJazanrefinery(400kb/d)onthecountry'sRedSeacoast.

·ReducedrunsinChina:China'srefineryrunsaredown2mb/dyear-on-year.

However,thisisamulti-facetedstory:ChineserefinerieshavehistoricallyreliedonMiddleEasternbarrelsaswellassuppliesfromRussia,IranandVenezuela-i.e.crudespreviously/stillsanctionedbytheUSandEurope,andavailableata

discount.Allofthesesuppliesaresharplyreduced,andthosediscountsareno

Longeravailable.Chineserefineriescouldhavereplacedthosebarrelswithlong-haulsuppliesfromtheAtlanticBasin,suchasthosefromBrazilorWestAfrica.

However,thesecrudesaresub-optimalforChineserefineries.Ontop,freightrateshaverisentosuchahighlevelthattheywillstillresultinnegativemarginsgivendomestic(regulated)productprices.Ratherthanbiddingforthoselong-haul

crudes,theChinesegovernmenthasencouragedusingdomesticcrudeinventoriesanddemanderosion.

AsshowninExhibit19,thesefactorshaveresultedinadeclineinglobalrefineryrunsof~6mb/dyear-on-year.Refinerieselsewherearealreadyrunningflatout,whichmeansthatatleastfornow,therearesimplynotenoughrefineriesavailabletopullharderonthe

crudemarket.

MORGANSTANLEYRESEARCH

9

MorganStanley|RESEARCHGLOBALIDEA

10

Exhibit18:Globalrefineryoutagesarerunning5-6mb/dabovenormal...

Refineryoutages

Planned+Unplannedoutages-global(mb/d)一2016-24—2025一2026

Soucn:IR,MorganStanioRasoach

Exhibit20:AmajordriverofrefineryoutagesisRussia….

Refineryoutages-Russia

orcodsghode

Exhibit19:...andrefineryrunsaresimilarly5-6mb/dbelownormalGlobalrefineryruns

(mb/d)

-2026-2025-2024-2023

Soucn:1EAPaboLogistcs.EnagrAspacts,MogmSteleyFiosearch

Exhibit21:...whosedieselexportshaveeffectivelystopped

Russia

Seaborneexportsofdiesel(30-daymovingaverage:mb/d)

-2026-2025-2024

Soucg:VortoonMorganStmiayResearch

Lookingahead:Statusquo=inventorydraws,andthestatusquolikelytolastlonger

Theresultofconstrainedrefiningcapacityisthatrefinedproductshavedonemostofthetightening,notthecrudemarket.Thishasledtotheunusualsituationthatthefront-

monthICEgasoilcontractisnowtradingat~$175/bblwhilstthefront-monthBrentcontractis'only'~$92/bbl.Thisyieldsacrackspreadofanall-timehigh$75/bbl.

Tohighlighthowunusualthisis,wehaveexpressedthepriceofBrentcrudeoilasa

percentageofthepriceofICEgasoil-seeExhibit22.Overthelast35years,thisratiohasaveraged83%witha+/-1xstandarddeviationrangeof76-89%.Atthemoment,thisratioisjust53%.Besidesanunusualdayin1991,thisisanall-timelow,and4.5xstandarddeviationsawayfromthehistoricalaverage.

Exhibit22:Crudeoilisrelativetodiesel

unusuallycheapExhibit23:Wenowassumearecovery

paththatstretchesinto2027

ICEBrent-to-gasoilpriceratio

Dailyfront-monthpriceratio,Brent/gasoil(x)

StanyRe58

Souc章：B0oTDerg.Morg8745uprtom

Productionrecoveryassumptions

ForkeyMiddleEastGulfproducers(mbid)

■SaudArabialan■UAE■lran■Kuwanoaa

Inprinciple,thisprovidesroomforcrudetorallymerelybypartiallyconvergingtowhere

GlobalIdea

dieselalreadyis,i.e.ifcruderevertedto,say,60%ofdiesel,itwouldexceed$105/bbl.

Eventhatwouldleaverefinershistoricallyprofitable.Forthattohappen,someadditionalamountofrefiningcapacitywouldneedtocomeback.Whetherthathappensisuncertain.However,withsuchahistoricamountofcapacityalreadyoffline,andrefiningprofitabilityatanall-timehigh,thebalanceofprobabilitypointstowardssomeofitreturning.Inturn,thatwouldexertmorecrudedemand.

However,evenwithcurrentlowcrudedemand,inventoriesarealreadydrawing.Ifthe

statusquopersists,inventorydrawswillpersist.Whethertheoverallpicturechanges

dependslargelyonthelengthofthegeopoliticalsituationintheMiddleEast.Wecannotforecastthiswithahighdegreeofprecision,butdatafromtheUppsalaConflictData

Program(UCDP)offersausefulhistoricalbaserate.

UCDP'sConflictTerminationDatasetrecords72completedinterstateconflictssince1946,drawnfrom48distinctunderlyingconflicts.Themediandurationoftheseconflictsisjust

8weeks.However,onceaconflictlastslongerthan6months,theprobabilityitwillalsopassthe1-yearmarkgoesto55%.Theuncertaintyintervalaroundthisiswide,i.e.40-70%.Toavoidfalseprecision,thisisprobablybestexpressedas'slightlymorelikelythannot'.

Combinedwithapparentlylimitedprogressonpeacenegotiations,thispointstowardsameaningfulprobabilitythatoilsuppliesfromtheMiddleEastremainunderpressureforsometimetocome.AftertheMemorandumofUnderstandinginmid-June,weestimatedthatMiddleEastsupplieswouldbenearlyfullyrestoredbeforeyear-end.Ifthatweretohappen,theoilmarketwouldreturntoasurplus.Wenowassumeamoregradual

recoverypaththatpointstowardssteadysupplygrowth,buttakesuntiltheendof3Q2027tocomplete–see

Exhibit

23

.

Withtheseassumptions,wenowseecontinuedinventorydrawsinbothourtotaloil

liquidsandourcrude-onlybalancethroughout4Q2026and1Q2027.Givenrefining

profitabilityisalreadyatarecordhigh,refinershavetheabilitytopaymore.Altogether,we'darguethatthissupportsthepriceforecastsshowninexhibit

Exhibit2

.

MorganStanleyResearch11

12

2025

1Q26

2Q26

3Q26

4Q26

2026

1Q27

2Q27

3Q27

4Q27

2027

Demand

105.3

104.9

100.1

103.3

106.0

103.6

105.8

105.8

107.5

108.1

106.8

OECD

46.2

46.0

44.7

46.1

46.5

45.8

46.3

46.2

47.0

46.8

46.6

Non-OECD

59.1

58.9

55.5

57.2

59.4

57.7

59.5

59.6

60.5

61.3

60.2

Non-OPECsupply

76.7

75.9

75.9

75.5

76.9

76.0

77.4

78.6

79.7

80.0

78.9

UnitedStatesC+C

13.6

13.6

13.8

13.9

14.0

13.8

13.9

13.9

13.9

14.0

13.9

UAE

3.9

3.5

3.9

2.7

3.1

3.3

3.6

4.0

4.5

4.6

4.2

Other

59.2

58.8

58.2

58.9

59.8

58.9

59.9

60.6

61.4

61.4

60.8

OPECNGLsandcondensate

4.7

4.3

3.1

3.5

4.1

3.7

4.6

4.7

4.8

4.8

4.7

CallonOPECcrude

24.0

24.7

21.2

24.3

25.0

23.8

23.8

22.5

23.0

23.2

23.1

OPECcrude

25.7

23.6

18.0

19.6

20.7

20.5

22.3

24.0

25.7

26.2

24.6

Impliedbalance

1.7-

1.1

-3.2

-4.7

-4.3-

3.3-

1.4

1.5

2.7

3.0

1.5

Misctobal

-0.5-

0.1

1.5

2.0

1.8

1.3

0.8

-0.3

-0.8

-