According to Goldman Sachs, a group made up of some of the most powerful oil producers in the world is very likely to take further measures to stem a drop in prices and try to balance the market.
OPEC and non-OPEC producers, an influential energy alliance known as OPEC+, will meet in Vienna, Austria, on Dec. 4 to decide the next phase of production policy.
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He comes in the middle recession fears, weakening crude demand in China renewed Covid-19 lockdowns and as market players assess the impending impact of a Western price cap on Russian oil.
Jeff Currie, global head of commodities at Goldman Sachs, said on Tuesday that a combination of factors led the bank lower its oil price forecast These last months.
“First and foremost was the dollar. What’s the definition of inflation? Too much money chasing…too few goods,” Currie told CNBC’s Steve Sedgwick at Goldman’s Carbonomics conference. Sachs in London.
The second factor “has to do with Covid and China – and by the way, it’s big,” he continued. “That’s worth more than the OPEC cut for November, let’s put it in perspective. And then the third factor is that Russia is just pushing barrels into the market right now ahead of the 5 December for the export ban.”
Currie said the medium-term oil outlook for 2023 was “very positive” and the bank planned to “stick to our guns” with a forecast for Brent crude at $110 a barrel for next year.
He admitted, however, that there were “a lot of uncertainties” ahead of him.
Oil prices have fallen in recent months. International reference Brent Crude futures, which stood at $100 a barrel at the end of August, traded at $85.46 a barrel on Tuesday afternoon in London, up 2.7% for the session.
WE West Texas Intermediate futures, meanwhile, were trading at $79.09 a barrel, up more than 2.4%.
“Demand is probably heading south again in China given what’s going on,” Currie said.
“I think the key point with China right now is the risk that you get a forced reopening. That means it’s going to be self-imposed lockdowns where people don’t want to get on trains, don’t want to go to the work and demand goes further south.”
Currie said OPEC producers will need to discuss whether to adjust to further demand weakness in China.
“I think there is a strong likelihood that we will see a reduction,” he added.
OPEC+ agreed at the beginning of October cut production by 2 million barrels per day from November. He came despite calls from the United States for OPEC+ to pump more to lower fuel prices and help the global economy.
Led by Saudi Arabia and Russia, OPEC+ cut production by a record 10 million barrels per day in early 2020 when demand dropped due to the Covid-19 pandemic. The oil cartel has since gradually unwound these record cuts, although several OPEC+ countries are struggling to meet their quotas.
OPEC+ recently suggests it could impose deeper production cuts to spur a recovery in crude prices. The signal came despite a report from the Wall Street Journal suggesting a production increase of 500,000 barrels per day was under discussion for Dec. 4.