Goldman Sachs commodity strategists said they expect Brent oil prices to approach the upper end of their projected $70-90 range during the summer, while also evaluating the principal risks associated with oil prices.
“Following the extension of OPEC+ cuts through Q2, we still expect a gradual and partial phase-out of the latest package starting in 2024Q3. An additional 6 months extension would boost 2024Q4 Brent to $90/bbl, $7/bbl above our Baseline,” they wrote.
“Geopolitical impediments to OPEC’s ability/desire to deploy spare capacity pose the sharpest upside price risk. We see a potential reduction in Iran supply as the key channel through which the outcome of US elections may affect oil markets.”
The strategists also noted a slight risk of price declines from potentially weaker demand in China, yet they argue that prices falling sustainably below $70 would probably need significantly reduced demand and a change in Saudi Arabia's strategy.
Goldman suggests that, in their main scenario of a soft economic landing, oil is expected to yield strong returns this year.
However, the investment giant also sees the value in oil in a no-landing scenario, driven by increased demand for inflation hedging, as well as in a hard-landing case, “driven by geopolitical shocks which would depress equity-bond returns via higher inflation and weaker growth.”