Goldman Sachs Group Inc. has revised its outlook for oil prices, citing lower OECD commercial stocks as a potential boost. The Wall Street investment bank estimates that OECD commercial stocks make up about a third of global stocks, and they were 30 million barrels lower than previously forecast in August.
This update has led Goldman Sachs to see less downside risk to oil prices from higher-than-expected inventories. The bank now believes that lower OECD commercial stocks could add $2 to its previous end-2023 forecast of $86 per barrel for Brent oil.
Despite recent volatility, Brent oil prices have remained near $84 a barrel. Goldman analysts attribute the oil market’s outperformance to the continued pricing of substantial deficits. Draws in crude stocks from higher refinery runs in the U.S. and Asia, along with a decline in non-OECD stocks driven by China, contributed to a month-to-date decline of 80 million barrels in global oil stocks.
Goldman Sachs also highlights the bullish risk of lower-for-longer OPEC+ supply, with Saudi Arabia’s commitment to cuts and openness to extending and potentially deepening them. If Saudi Arabia envisions a more aggressive price target, it is possible that production could stay at its current low level of 9 million barrels per day for a longer period.
However, there are also bearish risks to consider. Mixed news on China’s demand suggests weakness in macro data outside of the oil-intensive services sector. Additionally, the potential for higher Iranian supply, with an estimated 500,000 barrels per day increase in exports, poses a bearish risk to prices.
Overall, Goldman Sachs’ revised outlook takes into account the changing dynamics of global oil stocks and various factors that could impact prices in the near future.
Definitions:
1. OECD Commercial Stocks: Stocks of oil held by member countries of the Organisation for Economic Co-operation and Development (OECD) for commercial purposes.
2. Brent Oil: A type of crude oil used as a benchmark for global oil prices.
Sources:
– Reuters: Goldman Sachs sees less downside risk to oil prices as inventories decline (source article)
Source: claytoncountyregister.com
