Crude oil prices have so far held on to their gains from Monday despite the latest PMI reading for China, which showed a decline in March, suggesting hiccups along the way to recovery.
Prices soared by more than 6% on Monday following an unexpected declaration by OPEC+ on Sunday that nine of its members will implement voluntary production cuts to the tune of 1.16 million bpd.
Saudi Arabia alone would reduce its output by 500,000 bpd, Riyadh said, and Russia would extend an earlier production cut of the same size until the end of the year.
The additional cuts deepen the global supply reduction from OPEC+ to a total 3.66 million barrels daily, which is equal to 3.7% of the total.
Goldman Sachs, for instance, revised upwards its oil price forecast for the year, now expecting Brent to trade at $95 per barrel at the end of the year, up from an earlier forecast of $90 per barrel. It also raised its 2024 oil price forecast.
Energy Aspects’ Amrita Sen went higher, arguing that following the OPEC+ new cut, oil prices could hit $100 before the current quarter ends.
Morgan Stanley, however, bucked the bullish trend, revising its oil price forecast down, to $85 per barrel of Brent crude for this quarter and also cutting its outlook for prices for full-2023 and 2024.
The explanation for that move focused on demand, with the investment bank’s chief commodity strategist, Martijn Rats, saying that OPEC+’s decision “reveals something, it gives a signal of where we are in the oil market. And look, let’s be honest about this, when demand is roaring…then OPEC doesn’t need to cut.”
By Irina Slav for Oilprice.com
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