Morgan Stanley: Crude Oil Troubles Will Grow

Crude oil is under pressure in early Monday trading, with the United States Oil Fund LP USO down nearly 3 percent. That puts oil stocks under pressure as well. Transocean LTD RIG, for example, was lower by 3 percent.

Monday's pressure is not going to abate, according to analysts at Morgan Stanley. The analysts noted that U.S. crude stocks are “elevated and set to build through May.” That may lead to increased volatility, but the price upside is “limited.” On rallies, Morgan Stanley said it expects the higher prices to result in hedging opportunities for producers.

For prices to move higher, Morgan Stanley said that a “large outage or OPEC capitulation” is needed to turn the tide to a bullish market.