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Hours after OPEC+ announced it would reduce its combined oil production by more than 1 million bpd, Goldman Sachs issued a revision of its oil price forecast, raising it to $95 from $90 at the end of the year for Brent crude.
The bank also raised its Brent crude forecast for 2024, now seeing it at $100 at the end of the year from an earlier projection of $97.
Last month, Goldman Sachs said that crude oil prices could rise to $107 per barrel if OPEC stood by its production targets. At the time, Brent was trading at around $84 per barrel.
In that same March forecast, Goldman’s analysts predicted that rising demand from China and a slow increase in non-OPEC production could prompt the cartel to reconsider its targets and start boosting output from June onwards.
Even under that scenario, however, Goldman’s analysts noted that oil prices would rise in the second half of the year. And that scenario saw 1 million bpd added to global supply.
Then, at the end of March and with oil prices still quite subdued, Goldman reiterated its bullish outlook, advising traders to buy the dip while it lasted.
“We would argue you are buying the dip at this point,” the banl’s head of commodities Jeffrey Currie said, adding, “I have never seen a market sell off that sharply, but retain a bullish structure.”
"Today's surprise (production) cut is consistent with the new OPEC+ doctrine to act preemptively because they can without significant losses in market share," the investment bank said, as quoted by Reuters.
OPEC+ announced an unexpected update to its production cuts, to the tune of 1.16 million bpd, with Saudi Arabia accounting for the lion’s share, at 500,000 bpd. According to unnamed sources who spoke to the Financial Times, Riyadh had been annoyed by the Biden administration’s decision to delay the start of oil purchases for the SPR.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.