By The team at Goldman Sachs predicts that Brent crude prices will remain relatively stable in 2024, fluctuating within a range of $70-$90 per barrel. This forecast comes with a promise of low price volatility, setting the stage for a steadier market in the upcoming year.
Supply and Demand Balance
Goldman Sachs attributes the expected calmness in prices to a delicate equilibrium between supply and demand metrics. Despite a slight increase in the summer target price for Brent to $87/bbl, the overall outlook remains subdued. The balance is further bolstered by enhanced OECD stock drawdowns and adjustments in oil flows prompted by disruptions in the Red Sea region.
Market Drivers
Goldman’s analysts point to two main factors driving this market stability. Firstly, a “modest geopolitical risk premium” of $2/bbl has been factored in, supported by ample on-the-water stock levels buffering against potential shipping disruptions. Additionally, the role of OPEC+ cannot be understated, as the cartel’s surplus capacity offers a safety net against supply shocks. The cautious approach taken by key players like Saudi Arabia, coupled with the diminishing impact of U.S. shale consolidation, underlines a concerted effort to maintain a tight market.
In conclusion, the commodities team at Goldman Sachs anticipates a controlled environment for Brent crude prices through 2024, setting the stage for a year marked by stability and measured growth.
Tight Balance Between Supply and Demand
The stability of global oil markets is being influenced by the delicate balance between supply and demand. Projections show that while global demand is expected to increase by 1.5 million b/d this year, non-OPEC ex Russia supply growth is keeping pace at 1.3 million b/d. Factors such as upgraded growth estimates for key regions like India, the U.S., and the Middle East are being counteracted by slower growth in China, alongside supply revisions for Canada and Guyana.
OPEC+ Production Cuts Extended
Analysts predict that OPEC+ will prolong current production cuts well into the second quarter. However, a gradual tapering off of these cuts is anticipated in the latter part of the year. Forecasts indicate a modest supply deficit of 500,000 b/d in the first quarter of 2024, decreasing to 400,000 b/d in the following quarter.
Factors Influencing Price Volatility
Potential disruptions to shipping in the Strait of Hormuz and a potential reduction of 750,000 b/d in Iranian supply are highlighted as key upside risks. Conversely, there is also a likelihood of OPEC+ extending production cuts for the entire year, which could potentially drive Brent prices up by $7/bbl.
Price Predictions and Market Trends
According to projections, West Texas Intermediate prices are anticipated to remain $5/bbl below Brent prices until 2025. This outlook provides insights into the evolving dynamics of the oil market and the factors shaping future price movements.
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