OPEC can’t rebalance oil market alone, says Morgan Stanley

The Organization of Petroleum Exporting Countries (OPEC) and other major oil producers have taken ambitious measures to rebalance the oversupplied oil market, but their efforts aren’t enough, Morgan Stanley said in a research note on Thursday.

The Wall Street bank called on US shale producers to join in on efforts to tackle the global supply glut that sent prices down since 2014.

“If OPEC doesn’t balance the market, the oil price will have to force it somewhere else, most likely in US shale” Morgan Stanley analysts said in the report.

Oil prices have been volatile in recent months, even after OPEC and other major producers—including Russia—have eased output. However, as prices remained stubbornly low, they extended the accord into the first quarter of 2018.

“To support prices in the mid-$50s, OPEC-12 would probably need to lower production by another 200,000-300,000 barrels a day and extend the output agreement to end-2018. We find this unlikely,” the analysts added.

According to Morgan Stanley, US producers have to stop some pumps as well, and the number of rigs need to fall by 120-180 to constrain output to a level that doesn’t flood the oil market.