Morgan Stanley just raised its outlook for oil prices to $100 per barrel by the 3rd quarter. Here's why.

Morgan Stanley raised its outlook for oil prices on Friday due to low inventories, low spare capacity, and low investment.

The bank's commodities strategist and head of European oils, Martijn Rats, said in a note that he now sees the price of oil jumping to $100 per barrel by the third quarter of this year.

As of 12 p.m., the price of oil was $87.69 per barrel. Friday. The price of West Texas Intermediate crude was $84.93 per barrel. Though prices have pulled back recently, they are still near their highest levels since late 2014. Both crudes are headed for a fifth straight weekly gain.

Morgan Stanley said the commodity will continue to experience price pressures on the expectation that stockpiles will further deplete towards the end of 2022, after an already weak 2021.

The bank said that the supply capacity will shrink to 2 million barrels a day in the middle of the next decade from the current 3.4 million.

According to the bank, the investments in the sector are expected to fall by 30% by the end of 2030.

Rats said in the note that demand growth needs to slow down so the physical flow of oil can balance. Crack spreads, backwardation, and inventories that have fallen to low levels are all shown in the key oil products markets. This doesn't signal weakness.

The emergence of the Omicron coronaviruses variant shook the prices of global commodities.
Demand for the commodity hasn't dropped in the face of the spread of the Omicron variant, which has led to a 10% gain in the price of oil for the year.
The market is in a surprisingly large deficit, and Goldman said that the price of oil could go to $100 per barrel later this year. Oil prices could go to $150 per barrel this quarter due to US-Russia tensions, according to JPMorgan.