Morgan Stanley increased its oil price forecasts, citing a "relentless drawdown in global inventories" and lower output from Russia, projecting Brent crude at $120 per barrel in the third quarter.

"As inventories are already at multi-year lows, we expect this to continue to exert upwards pressure on oil prices," it said in a note dated March 16.

The bank raised its Brent price forecasts to $120 and $110 a barrel for the last two quarters of the year respectively, up from the $100 previously estimated for both quarters.

Additionally, the 2023 crude oil forecast was revised to $100 per barrel from $95 previously. "We have lowered our production estimate for Russia by a million barrels a day (mb/d)- a fall from 11 mb/d to 10 mb/d from April onwards," the bank added.

Brent crude futures were trading at $102.02 a barrel by 0926 GMT, after the International Energy Agency said 3 million barrels a day (bpd) of Russian oil and products could be shut in from next month.

But the bank also trimmed its 2022 oil demand growth forecast to 3.4 million barrels per day (bpd) from 4.0 million bpd previously due to a resurgence of COVID cases in key consumer China.

It also forecast 1 million bpd growth in supply from Iran in the second half of 2022 on a potential nuclear agreement that would release Iranian crude into the market.

But despite these risks to its forecast for higher prices, the bank kept its overall global demand estimate at an "above consensus" 2.5 million-3.0 million bpd, since inventory data suggests "that demand may already be running higher than most balances currently assume."