Goldman Sachs slashes oil price forecast by nearly 10% as Russian supply recovers

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The Johan Sverdrup oil field in the North Sea
Carina Johansen | AFP | Getty Images
Goldman Sachs analysts slashed their oil price forecast by almost 10% on the back of whey they see as increasing supply and slower demand for crude.

According to a report released late Sunday, the investment bank lowered its Brent outlook for December to $86 a barrel, down from $95 a barrel. In the same report, Goldman also revised down its WTI forecast for December from $89 per barrel to $81.

The revised projection marks Goldman’s third downward revision in six months, and comes in spite of last week’s announcement that OPEC kingpin Saudi Arabia is cutting production by another million barrels per day, effective July. Overall, the oil cartel made no changes to its planned oil production cuts for the rest of the year.

“Significant supply beats from Iran and Russia have driven speculative positioning to near record-lows,” Goldman analysts led by the bank’s Global Head of Commodities Research Jeffrey Currie said in the research report.

Russia’s oil production has remained resilient even in the face of Western sanctions, with Deputy Energy Minister Pavel Sorokin in April ascertaining that Moscow’s oil production will remain stable until 2025, according to the Neftegazovaya Vertikal magazine.

“After an initial sharp 1.5 million barrels per day drop, Russian supply has nearly fully recovered despite the decision by many companies to stop buying Russian barrels,” Goldman’s economists said.

The bank made upward revisions for oil supply forecasts coming from nations facing sanctions, with “2024 upgrades for Russia, Iran, and Venezuela of 0.4/0.35/0.05 mb/d, respectively.”

While reports of an interim nuclear deal between the U.S. and Iran have been described as false, market watchers have previously estimated that a successful agreement could see at least an additional million barrels a day in crude exports.

“Hope of a U.S.-Iran deal within grasp is one thing. But guarantee of a quick and unencumbered passage of such a complex, layered deal is quite another,” Mizuho’s Vishnu Varathan said in a daily research note.

Goldman is of the view that the additional cuts implemented by Saudi Arabia are unlikely to result in a price spike, even as the kingdom’s output will see a decline to 9 million barrels per day from around 10 million barrels in May.

“The extra Saudi cut and our expectation that OPEC+ will extend half of its April voluntary cut in 2024 will likely only partly offset these bearish shocks,” the report continued.

International benchmark Brent crude futures traded at $73.99 a barrel, down 1.07%, on Monday morning, while U.S. West Texas Intermediate futures stood at $69.43, dipping 1.05%.