Goldman Sachs lowers 2024 oil price forecast but predicts Saudi Arabia will not engage in "oil war"

On Sunday, Eastern Time, Goldman Sachs issued a report lowering its forecast for Brent crude oil prices next year, which it attributed mainly to the sharp increase in U.S. oil production.

Goldman Sachs lowers oil price forecast for next year

Goldman Sachs strategists led by Daan Struyven said they lowered their forecast for Brent crude oil prices next year by $10 to a range of $70-$90 a barrel.

Goldman Sachs expects Brent crude oil prices to peak at $85 a barrel by June 2024 before falling back to an average of $81 or $80 a barrel over the next two years - much lower than its previous forecast of $92 a barrel.

Goldman Sachs said that in 2023, oil production from non-OPEC countries was much higher than expected, which is also one of the key reasons affecting oil prices; and recently, strong supply from the United States has further strengthened this trend.

Strategists expect oil prices to experience moderate fluctuations in the coming year as production capacity growth in the United States and other non-OPEC countries will limit the upward price momentum brought about by the gap between supply and demand. However, downward pressure on oil prices will be limited, as OPEC+ production cuts to prevent oversupply will continue, and loose financial conditions should also provide a floor for oil demand.

Goldman Sachs expects oil prices to fluctuate between $70 and $90 next year

Saudi Arabia is less likely to disrupt the situation

At the same time, Goldman Sachs predicts that Saudi Arabia is unlikely to reverse the trend of production cuts and start a "price war" next year.

Some other industry experts have recently predicted that Saudi Arabia may abandon production cuts next year and instead release a large amount of new supply, thus pushing down oil prices and suppressing the market share of U.S. oil companies. However, Goldman Sachs believes that Saudi Arabia is unlikely to do so.

Goldman Sachs explained: “What drives strong U.S. supply are non-price factors, such as one-time relief from supply constraints, production jumps before acquisitions by private oil companies, etc… Secondly, Saudi Arabia has less incentive to fight a price war than it did in 1985, when its market share faced threat of a sharp decline.

Since September last year, international oil prices have fallen by about 20%. As of the close on Monday Eastern Time, WTI January crude oil futures closed up $1.04, or 1.46%, at $72.47/barrel; Brent February crude oil futures closed up $1.40, or 1.83%, at $77.95/barrel.