Adipec: Goldman reiterates Brent price of $115/b as supply tightens
Quantum Commodity Intelligence - Investment bank Goldman Sachs reiterated its bullish outlook for crude Tuesday, maintaining a $115/b price target for Brent in the first quarter of 2023 but with "significant upside" from that level.
Jeff Currie, head of commodities research at Goldman Sachs, pointed to a halt in releases from the US Strategic Petroleum Reserve, upcoming EU sanctions on Russian crude due in December, along with disappointing growth in US shale production.
"You have a relatively tight supply situation going into 2023 that we think will create significant upside," Jeff Currie told CNBC Monday.
"Our target on oil is $115 a barrel in the first quarter, but there's upside risk on that," Currie said, interviewed at the Adipec conference in Abu Dhabi.
In a report published after the October OPEC+ meeting, Goldman said that the producer group's decision to reduce output from next month would see daily production fall as much as 1.4 million bpd and could mean crude prices rising as much as a third.
The report, titled "OPEC+ takes on the West (very bullish)", the bank told clients that the group's 2 million bpd cut from baseline output quotas would mean an effective 1.2 million bpd reduction from their November forecast and 1.4 million bpd from 2023.
As a result, Goldman tentatively raised its Q422-Q123 price forecast by $10/b to $110-$115/b but added that there was scope for a price rise of over $30/b given how low global inventories have already been run down as governments bid to counter price spikes.
"The motivation for the OPEC production cut was concerns around a recession," Currie told CNBC Tuesday. "Let me remind you that 90% of the CEOs in America tend to agree with them."
"It's not our base-case forecast and they're left with the optionality to be able to increase production," Currie added.
Also speaking in Abu Dhabi, special presidential coordinator for President Joe Biden, Amos Hochstein, told Bloomberg TV that the administration will need to replenish the SPR to the tune of 200 million barrels, albeit over several years.
The US official also said a buy-back price of "$70/b or so" had given producers "certainty of price to some degree".
