Oil prices could have more to climb, with crude potentially rising as high as $100 a barrel next year, Goldman Sachs warned.
Slowing oil demand growth
The bank recently predicted that oil could trade within the range of $70-$100 in 2024, citing supply disruptions risks that lie ahead next year. The upper end of that range could imply as much as a 19% increase in oil prices, given that Brent crude traded around $84 a barrel on Thursday.
“OPEC production policy and discipline are likely to be key factors supporting the price path in 2024,” strategists said in a note on Wednesday.
OPEC+ producers are meeting to discuss possible changes to their collective oil production. Saudi Arabia and Russia, the bloc’s largest producers, have already committed to hefty voluntary production cuts that will run through the end of the year.
Those supply cuts could be worsened if conflict escalates in the Middle East, Goldman added. Iran, for instance, could become more involved in the Israel-Hamas war. And if the nation decides to block a key shipping passage for crude, that could end up affecting around 20% of the world’s oil supply, strategists estimated.
Tighter sanctions on Iran
The US also could impose tighter sanctions on Iran and other major oil producers, potentially worsening the supply glut.
It’s possible that the impact of these supply disruptions could be limited. The Middle East accounts for a smaller share of the world’s oil supply than it did in the 1970s and 1980s, when oil supply shocks helped spark a stagflationary crisis in the US. Back then, OPEC accounted for around 55% of the world’s crude supply. Today, it makes up just 35%.
Additionally, the Israel-Hamas war has had a muted impact on oil prices so far this year. Brent crude has actually declined around 3% over the last month.
“That being said, oil prices are volatile and can temporarily increase on mere fears of disruption, as experienced at the onset of the Russia-Ukraine war in 2022,” strategists added.
Other forecasters on Wall Street are bullish on oil for the long term, given the critical undersupply in the industry. Goldman Sachs’ former commodities chief previously warned of a “commodities supercycle,” a decade-long period where undersupply could keep commodities prices elevated.
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Source: Goldman Sachs
