Goldman Sachs dials down its 2024 oil price prediction by a substantial 12%, reaching an average of $81 per barrel for Brent crude, a notable drop from the earlier estimate of $92. The analysts attribute this revision to the persistent expansion in U.S. drilling rates and completion intensity.
Sunday's announcement from Goldman Sachs sees Brent crude prices hitting their peak for June this year at $85, a decrease from previous estimates. The persisting growth in drilling rates and completion intensity in the U.S. serves as the main impetus for the updated price forecast.
The price of Brent and West Texas Intermediate crude oil surged by 3.5% on Monday at 18:00 EST, reaching $79 per barrel for Brent and $74 per barrel for West Texas Intermediate. This marked an uptick of $9.58.
The oil price increase follows BP's announcement of halting all deliveries through the Red Sea due to intensifying attacks from Houthi rebels supported by Hamas in Yemen on shipping vessels.
Both oil contracts continue to linger beneath the $95 and $94 peaks they reached in September, despite OPEC+ and its allies declaring they'd extend production cuts by 2.2 million barrels per day up until the first quarter of the next year. Efforts are underway to uplift prices for this year.
U.S. oil production soared to record heights, which has put downward pressure on oil prices. The U.S. Energy Information Administration anticipates that oil production in the year will average a record-breaking 12.9 million barrels per day, with a further record of 13.1 million barrels per day anticipated in 2024.
Concerns over a potential decrease in oil demand, particularly in China, where the economy exhibits persistent weakness, have the market on edge.
However, factors such as OPEC+'s planned production cuts, the recovery of China's economy, and "moderate" risks of a U.S. recession may limit the extent of the oil price decline, as per assessment by Goldman Sachs.
Craig Erlam, chief market analyst at Oanda, reasoned that the investor optimism, considering major central banks could soon initiate interest rate cuts, increases the probability of a soft landing that could support oil demand.
A "soft landing" refers to a successful central bank policy of raising interest rates to combat inflation without triggering a recession.
