US Production Squeezes Brent, Goldman Forecasts Lower Prices Down the Road

Goldman Sachs said that robust US production will limit any increase in oil prices, lowering its price projection for Brent crude by $10 per barrel to between $70 and $90 in 2024.

The investment bank has revised its forecast for Brent, which was earlier expected to average $92 per barrel to a top of $85 per barrel in June 2024.

As of 05:26 GMT on Monday, Brent was trading at about $77, 20% below its multi-month highs set in September. West Texas Intermediate (WTI) oil was trading at about $72 per barrel.

According to Goldman Sachs, the United States is the primary source of non-OPEC supply, indicating that there are several factors supporting U.S. production that are expected to last until 2024.

Analysts predicted that the U.S reduce 48 oil production to 11.4 million barrels per day (mb/d) in the fourth quarter of 2024, increasing the prediction for the rise of the U.S. total liquids supply to 0.9 mb/d from 0.5 mb/d in 2024.

The bank did point out that factors such as the decision by OPEC to curtail supplies, a rebound in China, restocking in the US, and a low probability of recession should limit the negative risk to oil prices.

Goldman Sachs Warns of Potential $107 Oil Prices in 2024

In September, Goldman Sachs stated that if OPEC+ countries do not reverse their production cutbacks by 2024, oil prices may reach $107 per barrel by the following year. However, the bank cautions that a triple-digit price is not their base-case scenario.

In a move that it claims reinforces "the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets," Saudi Arabia extended its 1 million barrels per day (bpd) cut. This means that until the end of the year, the Saudis will pump 9 million bpd. The cuts will be reviewed monthly to consider deepening the cut or increasing production, depending on the state of the market.

Additionally, Russia prolonged its 300,000 bpd export reduction until December. It has the flexibility to reassess the limit every month and, according on market conditions, either deepen the cut or increase supplies.

Due to Saudi Arabia's actions, oil prices skyrocketed, with Brent surpassing $90 and WTI getting close to $88.

Goldman Sachs Commodities Research noted in a report that the prolonged cutbacks raise the upside risks for oil prices after the announcements.

The Wall Street bank stated that this optimistic scenario may drive oil prices to $107 per barrel in December 2024, although it stressed that this is not its base-case scenario.

Other analysts argue that, given the ongoing concerns about the economy and oil demand, the prolonged supply cutbacks by the two OPEC+ leaders, Russia and Saudi Arabia, do not justify an oil price of $100 per barrel.