Goldman Sachs has predicted a rise in Brent crude oil prices potentially reaching $77 per barrel in the fourth quarter of this year.
The bank’s outlook is driven by several key factors, including a recent interest rate cut by the Federal Reserve and strong U.S. economic data. Additionally, Hurricane Helene’s formation reminds markets that hurricanes still have the power to disrupt oil supply.
Despite Brent crude rallying four per cent last week due to escalating conflict in the Middle East, the market experienced a selloff on Monday following more peaceful signals from Iran’s president. As of Tuesday morning, Brent was trading around $74.35 per barrel for December delivery.
Goldman’s analysis suggests a global supply dip of about 500,000 barrels per day (bpd), with lower output from Canada, Russia, and U.S. shale regions. Meanwhile, global demand is ticking upward, particularly in the OECD countries and China, with the possibility of further Chinese policy easing contributing to demand growth.
While much of the recent price recovery happened in long-dated oil contracts, Goldman believes the spread between one-month and 36-month Brent prices should be $8 higher than it currently is.
They also noted that Brent’s implied volatility is low, sitting in the 17th percentile.
Goldman reiterated its earlier trade recommendation for European distillate, though it acknowledged this strategy has underperformed. Since March, a gasoil/Brent crack spread trade they advised has lost nearly $8 per barrel.
Overall, Goldman sees potential for oil prices to rise in the near term, but market volatility and geopolitical events will likely keep traders on their toes.
Separately this week, Russia is apparently planning for lower oil revenues in its 3-year budget as its plans on depressed prices and a relaxed tax regime sapping oil revenues by 14 per cent over the timeframe.
