Goldman Sachs cut its forecast for Brent crude oil price by almost 10 per cent because it sees a rise in supply and slower demand due to weak economic growth. Brent crude is the benchmark for two-thirds of the world’s oil.
According to the investment bank’s latest report released on June 11, it slashed its Brent outlook for December to $86 a barrel, down from $95 a barrel. Further, it has cut its WTI (West Texas Index) prediction for December from $89 per barrel to $81.
In six months, Goldman lowered its forecast for the third time, which comes at a time when top crude exporter Saudi Arabia is slashing production by another million barrels per day, effective July amid concerns over slowing global energy demand.
Also, weak Chinese economic data has triggered the investment bank to cut its outlook for crude prices.
On June 12, oil prices dropped $2 ahead of a US Federal Reserve meeting as investors kept an eye on the rate cut decision. Brent crude futures declined $1.91, or 2.5 percent, to $72.88 a barrel and WTI crude was at $68.15, down $2.02 or 2.8 percent.
"Significant supply beats from Iran and Russia have driven speculative positioning to near record-lows," CNBC quoted Goldman analysts led by the bank's Global Head of Commodities Research Jeffrey Currie as saying.
The investment bank mentioned that its forecast reduction was based on higher-than-expected supply from producers facing Western curbs, including Russia, Iran and Venezuela.
Moscow’s supply production has “nearly fully recovered” despite sanctions from Western countries and the decision by many companies to stop buying crude from the country.
Russian oil exports hit 8.3 million bpd in April, the highest since Moscow invaded Ukraine last year, the International Energy Agency (IEA) mentioned in a report last month.
“The fight against inflation may have been associated with changes in sanctions enforcement, and previously constrained productive capacity has been unlocked,” the bank said.
Goldman Sachs now predicts Brent hitting $93 a barrel by May 2024, down from $100 a barrel.
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