Goldman Sachs (NYSE:GS) has raised its 12-month forecast for Brent oil from $93 per barrel to $100 as it now expects modestly sharper inventory draws.
The key reason behind the change is that significantly lower OPEC supply and higher demand more than offset significantly higher US supply, it said.
"Overall, we believe that OPEC will be able to sustain Brent in an $80-$105 range in 2024 by leveraging robust Asia-centric global demand growth and by exercising its pricing power assertively," the US investment bank said.
Specifically, Goldman assumes Saudi Arabia unwinds the extra 1 million barrels per day (mb/d) cut gradually starting in the second quarter of 2024, but that the 1.7mb/d cut with eight other OPEC+ countries remains fully in place next year.
Goldman thinks that most of the rally in the oil price is behind us and that Brent is unlikely to sustainably exceed $105 next year.
First, while US supply is more capital disciplined than a decade ago, the upward trend in capex and supply beats over the past three years, and the recent inflection in rigs confirms its dynamism.
Second, high spare capacity and the return to growth in offshore projects limit the upside to long-dated oil prices.
Third, OPEC is unlikely to push prices to extreme levels, which would destroy its long-term residual demand.
The oil price has taken a breather today, with Brent down 1.4% at $93.01.