- Weaker Chinese demand, high inventories, and rising US shale production are leading to downward revisions in oil price forecasts.
- Goldman Sachs predicts Brent crude prices to average below $80 per barrel next year, with the possibility of a steeper decline depending on OPEC+ actions and a potential recession.
- Morgan Stanley also lowers its forecast, anticipating a market shift from tightness to potential surplus by 2025 due to increased supply from OPEC+ and non-OPEC producers.
Weaker Chinese oil demand, high inventories, and rising U.S. shale production have prompted Goldman Sachs to reduce its expected range for Brent oil prices by $5 to $70-$85 per barrel.
Commercial inventories have been stable in the peak summer demand season, contrary to expectations of drawdowns, analysts at the Wall Street bank wrote in a note carried by Investing.com.
Higher U.S. supply has been offsetting some of the seasonal demand, according to Goldman Sachs.
Efficiency gains among U.S. producers have raised shale supply by 200,000 barrels per day (bpd) above the investment bank’s expectations.
Higher supply from America, and possibly from OPEC+ later this year and in 2025, has led Goldman Sachs to forecast that Brent Crude prices would average below $80 per barrel next year.
The current forecast is now Brent to average $77 a barrel, as OPEC+ could opt for a strategic move to add supply and punish non-OPEC+ growth, according to Goldman’s note carried by Bloomberg.
OPEC+ could decide to add supply on the market in a move that could be “strategically disciplining non-OPEC supply,” Goldman Sachs’s analysts wrote.
“Prices could significantly undershoot in the short term, especially if OPEC were to strategically discourage US shale growth more forcefully, or if a recession were to reduce oil demand,” the bank’s analysts noted, referring to a scenario in which Brent could trade lower than its price forecast.
Morgan Stanley has also recently revised its oil price forecasts downward, reflecting expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank now anticipates that while the crude oil market will remain tight through the third quarter, it will begin to stabilize in the fourth quarter and potentially move into a surplus by 2025.
Morgan Stanley has cut its forecast for the fourth quarter to $80 per barrel, down from $85, and now expects prices to gradually decline to $75 per barrel by the end of 2025, slightly lower than their previous estimate of $76.
By Charles Kennedy for Oilprice.com
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