Goldman Sachs raised its forecast for Brent highs in the northern summer of 2024 by $2 per barrel, to $87. This is due to disruptions in the Red Sea contributing to slightly larger withdrawals than expected in OECD commercial inventories, the bank said.
Goldman noted that "OECD commercial land inventories have withdrawn somewhat faster than expected, as redirection of flows away from the Red Sea has increased waterborne inventories."
Despite the escalation in the Red Sea, Goldman expects Brent to remain in the $70-90 range, citing muted price volatility despite ongoing wars in the Middle East and Ukraine, reflecting a modest geopolitical risk premium.
According to Goldman, ample spare capacity would allow OPEC+ to offset disruptions in most scenarios, while strong non-OPEC supply growth is expected to roughly keep pace with solid global demand growth.
The bank projects oil demand growth of 1.5 million barrels per day (bpd) in 2024, with reduced demand from China offset by improvements in India and the United States.
Goldman also expects OPEC+ officials to announce an extension of production cuts in early March to keep the market in a moderate deficit, estimated at 0.5 million bpd in the first quarter and 0.4 million bpd in the second.
The bank anticipates Brent to average $80 in 2025 and believes that sustained drops below $70 would likely require much weaker demand or a shift in Saudi strategy, which seems unlikely given the country's economic incentives.
