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OPEC’s Oil Rally Seen Setting Stage for Price Retreat Next Year

More U.S. shale drilling, North Sea investment to limit upside, Morgan Stanley says.

By Stephen Stapczynski and Dan Murtaugh, Bloomberg | Updated on December 01, 2016

After jumping the most in nine months, oil is expected to climb further after OPEC beat the odds to agree on an output cut. Just don’t expect the rally to last.

Morgan Stanley sees more U.S. shale drilling and increased investment from Asia to the North Sea limiting oil’s upside, setting the market up for disappointment in late 2017. Goldman Sachs Group Inc. forecasts prices will retreat back to $50 a barrel in the second half of next year after possibly rallying higher than $60. Japan’s Mitsui & Co., which owns U.S. shale assets, sees oil slumping to the $40-range it’s been stuck in most of the last six months.

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