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Goldman Sachs cut its oil price forecast on Tuesday on the deteriorating global economic outlook—although it remained bullish on oil.
Goldman said it remained bullish, anticipating that oil prices would likely rise from the current levels given the state of the “critically tight” market. The group cited the strong dollar and weakening demand forecast, which will “remain powerful headwinds to prices into year-end. Yet, the structural bullish supply set-up -- due to the lack of investment, low spare capacity and inventories -- has only grown stronger, inevitably requiring much higher prices.” Goldman Sachs analysts Damien Courvalin and Callum Bruce said in a note to clients on Tuesday.
Goldman Sachs sees the price of Brent crude oil averaging $100 per barrel over the last three months of the year—down from its previous bullish forecast of $125 per barrel, which was already down from yet another forecast of $130 per barrel. Currently, Brent is trading near $86 per barrel.
For next year, Goldman sees Brent averaging a likely $108 per barrel, also down from its previous prediction of $125 per barrel.
While oil prices have fallen considerably in recent weeks, the oil markets don’t seem to be factoring in any economic growth outside China next year. But Goldman sees this economic growth at 1%.
“It would take an economic hard-landing to justify sustained lower prices,” Goldman said.
As for OPEC, Goldman sees the group keeping production near current levels for the remainder of the year, although any significant production cut at the upcoming Oct 5 meeting would trigger a rebound in prices.
Goldman’s recommendation to clients was to purchase Brent futures contracts that expire in December 2024. Goldman has been bullish all year, even through various downgrades to its oil price forecasts.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.