Aug. 18 at 2:08 PM
Morgan Stanley turns more cautious on oil E&P after Q2 results, downgrading Occidental Petroleum and Ovintiv to Equal-Weight from Overweight, and Northern Oil & Gas to Underweight from Equal-Weight.
MS notes 2026 free cash flow estimates rising ~7% due to lower capex and taxes but says shares “already reflect this, outperforming oil by ~7% in the past two weeks.” With fading seasonal tailwinds, MS sees downside risk for crude in H2.
Analysts cut ratings on three leveraged oil-focused E&Ps (NOG, OXY, OVV) but maintain preference for gas exposure, seeing recent dips as entry points. Oil fundamentals remain weak, citing extra OPEC and non-OPEC supply and softer seasonal demand, expecting Q4 2025 surplus of 1.4M bbl/day. Brent forecast ~
$60/bbl, WTI mid-
$50S early 2026.
For natural gas, weakness is “deferred scarcity, not derailment.” With limited production growth and rising LNG demand, Henry Hub prices expected >
$5, now in H1 2026 (vs H2 2025 prior).
$MS $OXY $OVV $NOG