After the "four consecutive increases," Morgan Stanley expects OPEC+ to increase production three more times, while Goldman Sachs: can only come once more

After OPEC+ unexpectedly announced a fourth consecutive production increase over the weekend, the two major Wall Street investment banks have developed serious divergences in their outlook for future production increases.

The Morgan Stanley analyst team believes that OPEC+ will continue to push for an increase of 411,000 barrels per day over the next three months, arguing that there is a significant "disconnection" between quota increases and actual production increases. Goldman Sachs, on the other hand, bets on a "one-time conclusion," believing that OPEC+ will only carry out one more round of production increases in August before pausing.

Last Saturday, OPEC+ decided to increase production by an average of 411,000 barrels per day starting in July, maintaining the scale of the previous two increases. This marks the fourth consecutive month that OPEC+ has announced an increase, as the organization has been announcing monthly increases since April this year to roll back the voluntary production cuts announced for 2023.

Goldman Sachs bets on a "one-time conclusion"

Goldman Sachs analysts Daan Struyven and others pointed out three supporting factors for the production increase in their latest research report: relatively tight spot oil fundamentals, strong global economic activity data, and seasonal support for oil demand in summer.

However, Goldman Sachs stated that OPEC+ will repeat the recent increase in August, but this will be the last time.

The key to Goldman Sachs' logic lies in the timing. The bank expects that when OPEC+ decides on the August production level on July 6, "the anticipated demand slowdown is unlikely to be sharp enough to prevent the increase." However, the situation will change starting in September. At that time, OPEC+ will maintain stable supply quotas, production outside of OPEC+ will increase, and global economic growth will slow in the third quarter.

Morgan Stanley foresees a "triple blow": consecutive increases will depress oil prices

In contrast to Goldman Sachs' cautious optimism, Morgan Stanley paints a more pessimistic picture.

Morgan Stanley analysts Martijn Rats and others predict that OPEC+ will continue its production increase for three months, which will push oil prices lower.

Morgan Stanley has identified a detail that the market is likely to overlook: there is a significant "disconnection" between quota increases and actual production increases. Analyst Martijn Rats pointed out that OPEC+'s actual production in May only reached about two-thirds of the declared increase, and this gap is expected to persist in June and July.

Morgan Stanley analysts stated:

The quota increase is likely to create room for production increases in Saudi Arabia, and Kuwait and Algeria will also follow suit to some extent. However, we expect that the production increases of the remaining OPEC+ members will not match the quota increases.

According to their forecast, by October, the 2.2 million barrels per day of voluntary production cuts announced by key OPEC+ member countries will be fully absorbed.

Key OPEC+ member countries announced a voluntary production cut of 2.2 million barrels per day in November 2023, which has since been extended multiple times, now set to last until the end of March 2025. In March of this year, eight countries decided to gradually increase oil production starting April 1

Subtle Consensus on Price Expectations: A Bearish Logic with Different Paths Leading to the Same Destination

Despite differences in production increase rounds between the two investment banks, they show remarkable consistency in oil price expectations.

Morgan Stanley expects that Brent crude oil futures will average $57.50 per barrel in the last two quarters of this year, and $55 per barrel in the first half of 2026. Goldman Sachs maintains its previous forecast, with an average price of $60 per barrel for Brent crude oil for the remainder of this year and $56 per barrel in 2026.

Both investment banks anticipate that as the impact of U.S. tariffs gradually becomes apparent and non-OPEC supply accelerates, the strength of oil prices will fade before the end of the year. This consistency reflects a shared concern over the slowdown in global economic growth and the formation of a supply surplus.

Morgan Stanley points out that oil prices may find support in the short term, as seasonal demand for crude oil typically peaks in May after refineries recover from maintenance, and healthy refinery margins also incentivize oil processing rates. However, this strength is likely to fade before the end of the year, as the impact of U.S. tariffs becomes more pronounced and non-OPEC supply accelerates