Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research has said.
The Wall Street bank had forecast Brent to trade at $86 in December and $93 at the end of 2024.
“Consider a bullish scenario where OPEC+ keeps the 2023 cuts … fully in place through end-2024 and where Saudi Arabia only gradually raises production,” analysts at the bank said in a report.
In that scenario, Goldman Sachs said Brent would likely climb to $107 a barrel in December next year.
Will oil go beyond $100?
Dr Yousef M.Alshammari, chief executive and head of oil research at CMarkits, said more voluntary cuts from OPEC could be deepened but he doesn’t think we will see that given the bullish reaction from the markets.
“Many analysts, including myself, see $100 Brent within reach especially if we see a pause from the Fed in September,” he also told Yahoo Finance UK.
Meanwhile, Osama Rizvi, energy analyst and economist at Primary Vision, said he was of the view that oil prices could temporarily touch $100, but said the price won’t stay there.
“Also it is very important to note that such a development would be because of manipulation of oil supply and demand dynamics and not an actual demand increase,” he told Yahoo Finance UK.
When posing the $100 a barrel question to independent macro analyst Piero Cingari, he also said he was bullish on oil – and also highlighted that the US is in a precarious situation regarding its strategic oil reserves.
“These reserves have dwindled to their lowest levels in four decades, leaving the US administration with limited manoeuvrability in terms of selling them to stabilise oil prices.
“Furthermore, the outlook in oil-sanctioned nations like Venezuela and Iran remains relatively stagnant in terms of changing the global crude oil landscape. The geopolitical tensions between these countries and the US continue to hinder any substantial alterations in the near-term global crude dynamics,” he told Yahoo Finance UK.
Will economies trigger a recession?
Given these circumstances, Cingari said it becomes apparent that the most viable way to prevent oil prices from surging to $100 per barrel is for advanced economies to trigger a recession.
“While Europe appears to be teetering on the brink of a possible economic downturn, the US has demonstrated impressive resilience thus far. This resilience might necessitate additional rate hikes to act as a counterbalance to rising oil prices,” he added.
Cingari also noted that he thinks oil prices have likely found a floor at $80-85, barring an advanced-economy recession.
Furthermore, the analyst said that If the US manages to avoid a recession, and the Chinese government decides to unleash a robust stimulus package to revive its economy, this could inject further fuel to the fire given the constrained oil supply.
“Such a scenario has the potential to push oil prices toward the psychologically significant threshold of $100 per barrel.”
Current oil prices for Brent and WTI
At the time of writing on Thursday 7 September, US crude oil, or West Texas Intermediate (CL=F), gave up some of its gains, shedding 0.35% to trade at $87.23 a barrel, while Brent crude (BZ=F) fell 0.22% to trade at $90.40 a barrel.
The extension of output cuts by Russia and Saudi Arabia through to the end of 2023 has helped lift oil prices back to the $90 level for the first time this year.
The Saudi cuts, until the end of this year, were by 1 million barrels per day (bpd) while Russia has cut 300,000 bpd, in addition to the April cut agreed by several OPEC+ producers running to the end of 2024.
An uncertain economic outlook for China is also still weighing on prices and the US recession possibility.
However, on Monday, Goldman Sachs lowered the estimated chance of a US recession over the next 12 months to 15%.
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