MOSCOW, 6 Oct — PRIME. The OPEC+ alliance on Wednesday agreed to the biggest cut in oil production since the start of the pandemic. This decision was followed by a sharp reaction from the US, and Goldman Sachs raised its forecast for Brent oil prices this quarter.
Here’s what analysts polled by Bloomberg have to say about OPEC+’s decision to cut production by 2 million barrels a day from November:
“Brent will return to $100 a barrel faster than we previously expected,” analysts at Morgan Stanley, led by Martin Rats, believe. Against the backdrop of OPEC+ production cuts, supply in the oil market risks becoming even more limited, but much will depend on the dynamics of oil production in Russia after the entry into force of the EU embargo, the bank notes. Morgan Stanley raised its forecast for Brent oil prices in the 1st quarter of 2023 by $5 to $100 per barrel. However, the bank did not change its forecasts for the remaining three quarters of next year.
“All the events now affecting the supply of oil are creating a foothold for price growth towards the end of the year,” said Damien Courvalin of Goldman Sachs in an interview with Bloomberg TV. The bank raised its forecast for Brent oil prices in the 4th quarter of 2022 by $10, to $110 per barrel.
UBS GROUP AG
Supply in the oil market is expected to become even tighter, with Brent oil prices rising above $100 a barrel in the coming quarters, UBS analysts including Giovanni Staunovo believe. The OPEC+ production cuts will be followed by the EU embargo on offshore oil supplies from Russia, the possible completion of the sale of oil from the strategic reserves of the countries of the Organization for Economic Cooperation and Development (OECD) and growth in demand against the backdrop of a transition from gas to generate electricity to oil.
ING GROUP NV
The OPEC+ decision is enough to change the balance of supply and demand next year, says ING’s Warren Patterson. He expects there to be a shortage of oil throughout 2023. There are clear upside risks to the oil price outlook for next year, Patterson added. ING’s current forecast suggests that Brent will hit $97 a barrel next year. It is possible that the US will continue to sell oil from strategic reserves, he believes, but the impact of this factor is likely to be limited.
While OPEC+’s output cuts look big on paper, the actual output cuts will be smaller as the alliance’s output is already behind target, Citigroup analysts including Francesco Martoccia and Ed Morse said. This decision could backfire against OPEC+ if the economy slows further and oil demand shrinks, the analysts added.
RBC CAPITAL MARKETS
The actual cut in OPEC+ production will be about 1 million barrels per day, and Saudi Arabia will account for more than half of this amount, according to analysts at RBC Capital Markets, including Helima Croft. Although the White House has signaled a possible further release of oil from strategic reserves, another major sale is not expected in the near term, the bank added.
SPI ASSET MANAGEMENT
“The oil sector is busy evaluating the actual cut in OPEC+ production, given the discrepancies between production volumes and quotas,” said Stephen Innes, managing partner of SPI Asset Management. According to him, Brent oil prices in the next few quarters may return above $100 per barrel.