Morgan Stanley raises Brent forecast as BP posts strong Q3 update

Chinese crude imports fell 21% year-on-year in September

Morgan Stanley raised its Brent crude forecast to $105 a barrel from $100 for the fourth quarter of 2026, and to $100 a barrel from $95 for the first quarter of 2027, according to analyst commentary collected in The Wall Street Journal’s Energy & Utilities Roundup for Wednesday, Oct. 14. While Persian Gulf crude exports are back within 10% of prewar levels, Brent remains above $100 a barrel, the analysts said.

“Supply, inventories and geopolitical risk all play a role, but one factor benefits Brent specifically: its short-haul nature at a time when freight is unusually expensive,” Morgan Stanley wrote. Long-haul crudes from Brazil, West Africa and WTI from the U.S. into Northwest Europe “have seen their FOB price fall relative to Brent to (partially) absorb the rise in freight cost,” the bank added.

British energy major BP posted a notably stronger-than-expected third-quarter business update, HSBC’s Kim Fustier wrote. Cash generation and deleveraging were particularly strong despite $1 billion higher tax outflows and $1 billion of hybrid bond redemptions. The company’s products division drove the performance, with an up to $2.1 billion uplift after refining margins jumped to $46.7 a barrel from $29.6 a barrel in the previous quarter. Oil and gas production of 2.19 million to 2.24 million barrels a day was broadly stable quarter-on-quarter and slightly above prior guidance.

Having met its net debt target, BP should be able to set out its capital allocation policy at its December strategy update, Fustier added. HSBC expects stable capital expenditure and no return of the quarterly buyback before 2028, with BP’s total liabilities seen at $34 billion at the end of 2026 and around $16 billion at the end of 2027.

On European renewables, J.P. Morgan analyst Javier Garrido wrote that Spanish renewable energy company Iberdrola should post solid third-quarter results and offer a strong basis to upgrade its 2026 adjusted net income guidance to at least 6.8 billion euros. The company benefits from capital-expenditure-led growth and strong volumes in its generation and supply division, Garrido added. Shares traded flat at 21.54 euros.

Jefferies analyst Ahmed Farman projected third-quarter EPS growth of around 6% year-on-year and group adjusted Ebitda of 3.7 billion euros, driven by around 13% growth in Iberdrola’s networks unit. Jefferies raised its net income forecasts through 2029 by roughly 3% on average following the incorporation of Finnish firm Caruna. “The Spanish renewable company could raise its full-year guidance but this is already reflected in the stock, meaning any upgrade is unlikely to be a catalyst for the shares,” Farman wrote.

RBC’s Keith Mackey said Enerflex is accelerating its pivot into high-growth data center infrastructure, leveraging two major behind-the-meter natural gas power awards. The analyst noted that the projects have capital-efficient deal structures where clients supply the primary generator engines, while Enerflex handles modular design and fabrication. The company’s backlog now exceeds 1.75 gigawatts, which Mackey estimated maps to about $1.9 billion in prospective revenue and $366 million in gross margins. He added that the earnings stream should “comfortably exceed the $100 million incremental facility capital investment Enerflex has announced.”

Morgan Stanley upgraded Australian oil and gas producer Karoon Energy to “overweight” from “equal-weight,” citing buoyant energy markets due to Middle East tensions. High shipping and insurance costs keeping Brent above $100 per barrel are extending EPS and free cash flow tailwinds for Australian oil and gas producers into 2027, the bank said. Karoon shares rose 5.5% to A$1.63, a three-week high. “The stock has underperformed recently, and we view the current share price as an attractive entry point,” Morgan Stanley said.

In Malaysia, TA Securities analyst Hafriz Hezry said renewable energy supply could remain significantly cheaper than grid electricity, supporting stronger demand over the next two years. The national grid access charge has been raised to 0.18 ringgit per kilowatt-hour from 0.14 ringgit previously, Hezry said. Renewable electricity is estimated to cost 0.54 ringgit per kilowatt-hour, about 19% less than grid electricity for data centers after projected January 2027 surcharges. About 3.1 gigawatts of renewable energy projects have been registered, potentially generating 12 billion to 14 billion ringgit in solar project construction work. TA Securities maintained an overweight rating on Malaysia’s power and utilities sector, naming Samaiden and Tenaga Nasional as potential beneficiaries.

Oil futures moved higher Wednesday as Houthi strikes on Saudi targets, attacks on shipping in the Strait of Hormuz and continuing Russia-Ukraine strikes kept the market on edge, despite the amount of oil making it out of the Persian Gulf. West Texas Intermediate crude was up 1.3% at $95.40 a barrel in midday New York trading, while Brent gained 0.2% to $105.91 a barrel. Dennis Kissler of BOK Financial said traders remained focused on oil flows from the Middle East along with diesel supplies reportedly moving from Russia. “Near-term futures seem to be pricing in a higher probability of a major military conflict coming back to the Middle East,” Kissler wrote.

The session began with steeper declines after Yemen’s Houthi militants struck a building at the headquarters of Saudi Arabia’s state oil company Aramco. In early European trading, Brent was down 0.1% at $105.65 a barrel while WTI was up 0.1% at $94.23 a barrel. Analysts at ANZ cited data from the UK Maritime Trade Operations showing 24 ships were hit in the two weeks to October 11. “The next most intense period of attacks was during the first two weeks of March,” they said.

By the close, both benchmarks had pared losses as Nymex diesel futures rose 4.5%. Ritterbusch & Associates said in a note that “the magnitude of today’s diesel price rebound reinforces our bullish trading bias.” Brent ended down 0.9% at $105.69 a barrel while WTI edged up 0.4% to $94.14. The latest Chinese data showed total crude imports fell 21% year-on-year in September, while refined products were down more than 53%.