Goldman Sachs Commodities Research has warned that oil prices could experience a significant surge in the coming year if Saudi Arabia and Russia do not reverse their current supply cuts, CNN reported on Thursday. The bank's analysts foresee a bullish scenario where the Organization of Petroleum Exporting Countries and its allies (OPEC+) maintain the 2023 cuts through the end of 2024, and Saudi Arabia only gradually increases production. Under these conditions, Brent crude prices could potentially climb to $107 per barrel by December 2024.
Previously, Goldman Sachs had predicted Brent crude to reach $86 per barrel by December this year and $93 by the end of 2024. However, this is not the bank's "baseline view" as such a strategy could lead to an increase in supply from US shale producers to lower prices. The bank also highlighted that higher prices could stimulate further investment into clean energy.
The extension of output cuts by Russia and Saudi Arabia through to the end of 2023 has already helped lift oil prices back to the $90 level for the first time this year. The Saudi cuts were by 1 million barrels per day (bpd) while Russia has cut 300,000 bpd, in addition to the April cut agreed by several OPEC+ producers running to the end of 2024.
However, an uncertain economic outlook for China and the possibility of a US recession are still exerting downward pressure on prices. Despite this, Goldman Sachs recently lowered the estimated chance of a US recession over the next 12 months to 15%.
As of Thursday, US crude oil , or West Texas Intermediate (CL=F), was trading at $87.23 a barrel, shedding 0.35% of its value, while Brent crude (BZ=F) fell 0.22% to trade at $90.40 a barrel.
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