Goldman Sachs Lifts Its Brent Summer Peak Forecast

Goldman Sachs raised its summer 2024 Brent peak forecast by US$2 a barrel to US$87 as disruptions in the Red Sea contribute to modestly larger-than-expected draws in OECD commercial stocks, the bank said in a note dated Sunday.

"OECD commercial stocks on land have drawn somewhat faster than expected as the redirection of flows away from the Red Sea has increased inventories on water."

Despite the Red Sea escalation, Goldman expects Brent to stay in the US$70-US$90 range, noting that the muted price volatility despite the ongoing Middle East and Ukraine wars reflected a modest geopolitical risk premium.

The elevated spare capacity would allow OPEC+ to offset disruptions in most scenarios, while robust non-OPEC supply growth is likely to nearly keep pace with solid global demand growth, Goldman said.

The bank continues to project oil demand growth at 1.5 million barrels per day (bpd) in 2024, with a downgrade in China demand balanced by upgrades in India and the United States.

Goldman also expects OPEC+ policymakers to announce an extension of output cuts in early March to keep the market in a moderate deficit, which it sees at 0.5 million bpd in the first quarter and 0.4 million bpd in the second quarter.

The bank still expects full extensions of the OPEC+ cuts through the second quarter of this year, followed by a gradual and partial phase-out of the latest package starting third quarter.

Goldman forecasts Brent to average US$80 in 2025, while a sustained drop below US$70 would likely require both much weaker demand and a shift in Saudi strategy, which seems unlikely based on Saudi economic incentives, it added.

Brent crude futures fell 35 cents to US$81.27 a barrel by 0417 GMT in Asian trading hours, while U.S. West Texas Intermediate crude futures (WTI) declined 33 cents to US$76.13 a barrel.