Brent crude oil is expected to reach $100 (£82) per barrel in the next 12 months (up from an earlier forecast of $93 per barrel), according to Goldman Sachs Research.
That’s because reduced supply from OPEC and rising demand are expected to more than offset an increase in oil supply coming from the US. OPEC will probably be able to keep Brent prices in a range of $80-$105 next year, Goldman Sachs head of oil research, Daan Struyven writes in the team’s report.
“Lower for longer” supply from Saudi Arabia and its OPEC+ partners is the main reason for the forecast change. Saudi Arabia’s recent production announcement signals its “strong determination to drive down inventories and push up prices,” according to Goldman Sachs Research.
At the same time, there’s scope for Saudi Arabia to boost profits in 2024 depending on which supply cuts are expended, as the increase in oil prices can compensate for the decline in Saudi production.
OPEC is likely to reduce its oil production for longer because of more supply coming from outside the organisation — most notably from the US. Supply constraints for parts, rigs, and workers have eased in the US, and producers are drilling and completing wells more quickly with more powerful rigs with less downtime.
There will likely be more global demand for oil in 2024 led by Asia, as the slowdown in China’s economy shows signs of “bottoming out.” India and the Middle East are also expected to have large increases in demand.
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The rise in energy prices isn’t expected to derail a soft economic landing for the US economy, according to Goldman Sachs Research. Most of the oil rally has probably taken place, measures of inflation expectations appear well anchored, and the Federal Reserve is focused on core inflation (which doesn’t include energy). In addition, the hit to growth from oil in the US and Europe is expected to be moderate, and natural gas prices remain low.