Morgan Stanley raised its quarterly outlook for Brent crude prices as it now expects a balanced oil market this year having expected a surplus earlier.

"Recent inventory declines suggest the oil market has been tighter than we initially expected," Morgan Stanley analysts wrote in a note dated Monday.

The bank expects Brent to average $82.50 per barrel in the first and second quarters of this year, compared with $80 and $77.50 previously. It raised forecasts for the last two quarters to $80 per barrel.

Brent futures were trading around $82 a barrel at 0900 GMT on Tuesday, while U.S. West Texas Intermediate (WTI) crude was at $77.

The bank lowered its forecast for non-OPEC supply growth to 1.5 million from 1.7 million barrels per day (bpd) and raised its global demand growth forecast to 1.5 million from 1.3 million bpd.

"Supply has been lower than expected, partly due to OPEC but also due to the U.S.."

Members of the Organization of the Petroleum Exporting Countries and allies including Russia – collectively known as OPEC+ - agreed to voluntary output cuts of about 2.2 million bpd for the first quarter led by Saudi Arabia rolling over a 1 million bpd voluntary reduction.

Two OPEC+ sources told Reuters that OPEC+ will decide in March whether or not to extend voluntary oil production cuts in place.

As OPEC compliance has been encouraging so far, the oil market is likely to remain in balance in 2024, which should support Brent in the $80-$85 per barrel range, Morgan Stanley added.

The analysts noted that demand remains robust, and upward revisions to flight schedules point to stronger-than-expected jet fuel consumption this summer.

(Reporting by Ashitha Shivaprasad in Bengaluru; editing by Jason Neely)