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Goldman Sachs lowers Brent crude price projection due to high US production

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Goldman Sachs revised its forecast for Brent, which was earlier expected to average USD 92 per barrel to a peak of USD 85 per barrel in June 2024

American financial services giant Goldman Sachs has now said that robust US production would limit any increase in oil prices, lowering its price projection for Brent crude by USD 10 per barrel to between USD 70 and USD 90 in 2024.

In a report published on December 17, Goldman Sachs’ analysts stated, “In 2024, we continue to anticipate range-bound pricing and very mild price volatility upside price movements should be limited by elevated spare capacity to handle tightening shocks.”

The investment bank has revised its forecast for Brent, which was earlier expected to average USD 92 per barrel to a peak of USD 85 per barrel in June 2024.

According to Goldman Sachs, the United States is the primary source of non-OPEC supply, indicating that there are multiple factors supporting US production that are expected to last until 2024.

Analysts revised their growth estimate for the United States’ total liquids supply in 2024 to 0.9 million barrels per day (mb/d) from 0.5 mb/d, predicting that the country’s Lower 48 crude output would reach 11.4 million mb/d in the fourth quarter of 2019.

The bank did point out that factors such as the decision by OPEC to curtail supplies, a rebound in China, restocking in the US, and a low probability of recession should limit the negative risk to oil prices.

“Saudi Arabia is unlikely to ‘flush’ the market in 2024”, analysts at Goldman Sachs stated, adding that “we expect full extensions of the OPEC+ cuts announced in April 2023 (1.7 mb/d) through 2025, and of the additional 2.2 mb/d package through 2024Q2.”

“We adjust our OPEC range trade to a short $70 put, long $80/90 call spread option on Brent Jun24, and still recommend long summer 2024 gasoline margins,” they concluded.

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