Brent oil prices could still end the year at $96 per barrel, J.P. Morgan analysts said, adding that they view the surprise OPEC supply target cuts as a "preemptive measure" to assure that surpluses in the market do not extend into the second half of 2023.
Saudi Arabia and other Organization of the Petroleum Exporting Countries announced further oil output cuts of around 1.16 million barrels per day, a surprise move that sent crude prices surging and which the United States called "inadvisable".
The pledge brings the total volume of cuts by OPEC+ to 3.66 million bpd according to Reuters calculations, equal to 3.7% of global demand.
Sunday's development comes a day before a virtual meeting of an OPEC+ ministerial panel, which includes Saudi Arabia and Russia, and which had been expected to stick the existing output plan.
J.P. Morgan further noted it had earlier assumed both the Biden administration and the producer group to act in the first quarter.
"The most surprising part of the announcement is that it was not made sooner," J.P. Morgan analysts said in a note dated April 2, adding, "acting later diminishes the impact on overall balances and hence it takes longer for the price impact to take hold."
However, Barclays said it sees a $5 upside to its $92 per barrel price forecast for Brent this year after the OPEC+ cuts.
Earlier Goldman Sachs also raised its Brent price forecast for December 2023 by $5 to $95 a barrel, and that for December 2024 by $3 to $100 per barrel.
