Goldman Sachs downgrades forecast for oil prices in 2023

MOSCOW, 28 Sep — PRIME. Analysts at Goldman Sachs lowered their 2023 oil price forecast on Tuesday amid expectations of reduced demand and a stronger dollar. However, the long-term outlook for the oil market remains bullish due to ongoing supply problems.

The bank has revised downward its forecasts for oil prices next year by an average of $17.5 per barrel, although a seasonally adjusted supply deficit is expected in the 4th quarter of 2022 and 2023.

The oil price forecast for the period from the 4th quarter of 2022 to the 4th quarter of 2023 was lowered by an average of $19 per barrel. At current prices, global oil demand could rise by 2.0 million barrels per day in 2023, up from a previous estimate of 2.5 million barrels per day, the bank said.

“Even with cautious assessments of economic growth … oil supply will remain critically tight. OPEC reserves and spare production capacity are holding near record lows. At the same time, limited supply may soon again support oil quotes, as the program for the sale of oil from US strategic reserves comes to an end, and Russian production is expected to decline later this year,” analysts at the bank said. Short-term oil price dynamics are likely to remain volatile, according to Goldman. The sharp strengthening of the dollar and lower demand forecasts will continue to put downward pressure on oil until the end of this year.

“The fact that the oil market is pricing in such a small expected increase (in demand) may be surprising. However, it reflects how many investors left the market en masse, frightened by the extreme price volatility of the past spring,” analysts add.

In their opinion, a prolonged price reduction will be justified only in the event of a hard landing in the economy and a reduction in global GDP.

Oil prices, which fell to a 9-month low on Monday, rose on Tuesday amid supply disruptions due to Hurricane Ian in the Gulf of Mexico and a slight weakening of the US dollar, and are under pressure again on Wednesday.

According to Goldman forecasts, OPEC will not increase production targets this year, and in 2023 oil production in the cartel will stabilize at current levels.