Goldman Sachs on Sept. 27 cut its 2023 oil price forecast due to expectations of weaker demand and a stronger U.S. dollar, but said the ongoing global supply disappointments only reinforced its long-term bullish outlook.
Goldman’s commodities research division lowered the forecast for next year by $17.5/bbl on average, even as it saw a seasonally adjusted global oil market deficit in the fourth quarter of 2022 and in 2023.
It revised its oil price forecast lower by $19 per barrel on average for the period stretching from the fourth quarter of 2022 to the fourth quarter of 2023 and sees global oil demand growing in 2023 by 2 million bbl/d at current prices, versus a previous forecast of 2.5 million bbl/d, according to a research note issued by the investment bank.
“Even with a cautious growth outlook ... the oil market remains critically tight, with still near-record low inventories and OPEC spare capacity and with supply soon set to turn supportive once again between the end of the U.S. SPR (Strategic Petroleum Reserve) sale and the expected decline in Russian production later this year,” the note said.
The short-term path for oil prices is likely to remain volatile, Goldman said, adding that a sharply appreciating dollar and lower demand expectations will continue to put downward pressure on oil for the rest of this year.
“While it may be surprising that oil is pricing such low growth expectations, this reflects the outsized exodus of investors, forced away by the extreme price volatility this spring,” it said.
It would take an economic hard landing and a contraction in global GDP growth to justify sustained lower prices, the note said.
Oil prices, which touched a nine-month low on Sept. 26, were up more than 2% on the back of supply curbs in the U.S. Gulf of Mexico due to Hurricane Ian and a slightly weaker dollar.
Goldman does not expect OPEC to increase its production quotas this year and sees the oil exporting group stabilizing output near current levels through 2023.
Recommended Reading
US Drillers Cut Oil, Gas Rigs for Third Week in a Row
2024-04-05 - The oil and gas rig count, an early indicator of future output, fell by one to 620 in the week to April 5, the lowest since early February.
US Drillers Cut Oil, Gas Rigs for Fourth Week in a Row-Baker Hughes
2024-04-12 - The oil and gas rig count, an early indicator of future output, fell by three to 617 in the week to April 12, the lowest since November.
US Drillers Cut Oil, Gas Rigs for Second Time in Three Weeks
2024-02-16 - Baker Hughes said U.S. oil rigs fell two to 497 this week, while gas rigs were unchanged at 121.
US Gas Rig Count Falls to Lowest Since January 2022
2024-03-22 - The combined oil and gas rig count, an early indicator of future output, fell by five to 624 in the week to March 22.
US Drillers Add Most Oil, Gas Rigs in a Week Since September
2024-03-15 - The oil and gas rig count, an early indicator of future output, rose by seven to 629 in the week to March 15.