UPDATE: Morgan Stanley Initiates YPF at Overweight (YPF)

Morgan Stanley is out with its report today on YPF YPF, initiating YPF at Overweight. In a note to clients, Morgan Stanley writes, "We initiate coverage of YPF at Overweight. We expect higher domestic oil prices based on Argentina's macro policy of letting inflation run ahead of currency and the country's continued need for oil production. YPF contributes ~40% of Argentina's crude production. Domestic oil prices in Argentina are kept artificially low, on average 50% below the international market price ($110/bbl). We think the market anticipates a change in oil prices but misses the 'big picture.' Once prices reach ~$70/bbl, we think it will unlock several optionalities in the unconventional shale play and oil production growth supported by reserve addition on higher recovery. If Argentine oil prices converge with international prices over the next three years (instead of five, as we forecast), then our $95 bull case could become our base case." Morgan Stanley has a $57 PT on YPF. Shares of YPF closed Friday at $41.07.