If oil had a face right now, it would be grinning awkwardly—and Morgan Stanley can’t look away. According to the bank’s latest note, the Brent crude forward curve has twisted itself into a bizarre shape: it’s sloping down hard across the first nine contracts, then turning upward into 2026.
In Morgan Stanley’s words, “there is little historical precedent” for this lopsided smile.
What’s behind the weirdness? Blame the usual suspects: a U.S.-driven trade war, OPEC+’s unexpected pump-fest, and a looming surplus that has investors reading the tea leaves—and not liking what they see. Brent prices have already dropped about 12% this month, and Morgan Stanley expects them to sink into the low $60s later this year.
For now, the market still clings to backwardation—meaning traders are willing to pay up for immediate delivery, a bullish signal. But if you look past the next few months, things start to smell like surplus. Morgan Stanley warns that after the third quarter, “trade tariffs will turn into a meaningful headwind for oil demand,” flipping the market into contango and signaling a supply glut big enough to make even the most bullish oil trader lose sleep.
And this odd “smile” isn’t just rare—it’s practically unheard of. Morgan Stanley’s analysts noted that in about 30 years of data, they haven’t seen the curve behave quite like this. Translation: when markets start smiling at you like that, it might be time to double-check if you’re standing on a trapdoor.
Enjoy the tightness while it lasts. Because according to Morgan Stanley, the oil market is about to stop smiling—and start dumping.
Current Brent prices are trading at $64.65 per barrel as of Tuesday morning.
By Julianne Geiger for Oilprice.com
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