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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The Russian invasion of Ukraine disrupted global crude flows in March, causing prices to soar. International benchmark Brent reached USD 139.13 per barrel, the highest level since 2008. The second half saw a sharp decline in prices as central banks raised interest rates and stoked recessionary fears.

On the last trading day of the year 2022, Brent crude finished at USD 85.91 per barrel, up over 3% to USD 2.45. US West Texas Intermediate crude increased USD 1.86 or 2.4% to settle at USD 80.26 per barrel.

After increasing by roughly 10% in 2021, Brent increased by 50% in 2022. Following a gain of 55% the previous year, US crude increased by roughly 7% in 2022. The year 2020 saw a substantial decline in both benchmarks as the COVID-19 pandemic reduced fuel usage.

Brazil’s Lula Decrees Extension For Tax Exemption On Fuels
Luiz Inacio Lula da Silva, Brazil’s recently sworn-in president, issued a decree extending for 60 days an exemption for fuels from federal taxes, a move passed by his predecessor with the intention of bringing down their cost.

The decree was one of Lula’s first actions as president, replacing far-right President Jair Bolsonaro and formally appointing his 37-person Cabinet, which he announced in the hours following his inauguration.

Fuel exempt from federal taxes will save the federal government 52.9 billion reais annually. Economy Minister Fernando Haddad had previously stated that it would not be extended, creating a division in the new Cabinet.

On the other hand, the new CEO of Brazil’s state-run oil corporation Petrobras announced that he intended to change the nation’s fuel price policy, but assured investors that they shouldn’t be concerned.

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Brent crude is the benchmark for oil prices. Goldman identifies Brent valued at US$75 per barrel over next three months. According to CNBC, J.P. Morgan analysis sees Brent valued at US$70 in 2018; and the price will increase to US$78 in the first half of the year.

“Importantly, all the pillars of the New Oil Order remain intact in our view so this is a cyclical call,”  Goldman Sachs analysts Jeff Currie said, “The New Oil Order is on hiatus with its next point of reckoning likely a few years away.”

US is growing exponentially in oil production and has fueled its output; and will potentially beat Russia, world’s largest crude producer.

Many US drillers and oil majors have decided to sharply focus on ‘efficiency’ and ‘fiscal discipline.’ The investment bank also considers other factors such as ‘backwardation in oil markets,’ which determine the oil prices in future.

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