Oil prices slipped today, reversing previous gains, as traders weighed rising shipping risks in the Red Sea and Fed officials pushing back against bets of interest rate cuts next year.
In the meantime, Goldman Sachs adjusted its forecast for 2024 Brent oil prices, moderating the range to $70-$90 per barrel.
The revision is based on expectations of a modest deficit and slightly lower long-dated prices, according to analysts at the firm.
The bank has increased its forecast for 2024 US liquids supply growth to 0.9 million barrels per day (mb/d), up from 0.5 mb/d, due to ongoing improvements in drilling speed and well completion intensity.
Despite a lower hurdle rate, higher spare capacity, and cost disinflation, Goldman Sachs has slightly reduced its 36-month Brent forecast to $72 per barrel. The updated projection sees Brent reaching $85 by June 2024, with an average of $81 in 2024 and $80 in 2025.
“We see some upside to forwards because spot prices look low relative to inventories and rates, positioning is depressed, and easing financial conditions support our long-held view that demand will grow solidly in 2024,” the analysts said in a note.
“While we have adjusted the range, we still look for range-bound prices and only moderate price volatility in 2024. Elevated spare capacity to handle tightening shocks should limit upside price moves. The OPEC put, strategic China and US restocking, and modest recession risk should limit downside risk to prices.”
Goldman’s forecast update comes after Brent oil prices have fallen by 20% since late September to $77/bbl as non-OPEC supply, led by the US, has continued to increase.
On Saudi Arabia, analysts at Goldman believe that the oil giant is “unlikely to flush the market in 2024.
“We thus expect full extensions of the OPEC+ cuts announced in April 2023 (1.7mb/d) through 2025, and of the additional 2.2mb/d package through 2024Q2, with only a gradual and partial phase-out of the latter starting in July 2024,” the analysts concluded.