Oil prices may have had an impressive rally this year – until last week – but the longer-term trend looks downbeat. “Deflationary forces are gathering momentum,” Morgan Stanley analysts wrote in a new report. The most recent jump in prices through mid-May came largely as a result of geopolitical risk and supply outages . Rising tensions in the Middle East and disruptions in places like Venezuela and Iran are showing no signs of going away anytime soon. These geopolitical factors will keep some upward pressure on oil prices for the next few quarters. However, in the background, there are several variables that could exert deflationary pressure on the oil market. Morgan Stanley has noted that U.S. shale is slowing, “but with 200 [billion] barrels of resource with breakevens in the $40-45/bbl range, there is an increasingly credible scenario that shale could grow >1 mb/d per year out to 2025.” […]