Record Oil Inventory Drawdowns Could Spark $150/bbl Crude and Impact Japanese Stocks
Morgan Stanley says Japanese equities now closely track oil volatility, with Nikkei 225 futures co-moving strongly with crude since March 9, prompting a defensive, value tilt. UBS warns global oil stockpiles could hit record lows by end-April, leaving a 10 Mb/d shortfall and lifting crude forecasts to $150/bbl.
1. Oil Volatility Drives Japanese Equities
Morgan Stanley analysts link sharp swings in Japanese stocks to oil market disruptions around the Strait of Hormuz, noting particularly strong five-minute co-movement between Nikkei 225 futures and crude since March 9. They advise a defensive, value-oriented stance and smaller-cap exposures while low-volatility factors gain appeal.
2. Global Inventories Face Historic Drawdowns
UBS projects that if Strait of Hormuz closures persist, global crude inventories may reach all-time lows by end-April, with pipeline flows offsetting only half of lost volumes and a remaining shortfall near 10 Mb/d. This imbalance may drive crude to $150-$160/bbl absent demand destruction.