Goldman Sachs has raised its forecasts for Brent crude futures prices following the unexpected announcement from OPEC+ about adopting further production cuts.
Analysts at the bank noted in a memorandum on Sunday that the forecast for Brent crude prices for December 2023 increased by five dollars to 95 dollars per barrel, while the forecast for December 2024 was raised by three dollars to 100 dollars per barrel.
Brent crude futures rose to their highest level in nearly a month, exceeding 86 dollars per barrel at the start of trading on Monday after OPEC+'s announcement.
The bank stated that "the unexpected production cut aligns with OPEC+'s new approach of acting preemptively since they can do so without incurring significant losses in market share."
It added that while this move was surprising, the decision reflects important economic considerations and potential political factors.
The bank's estimates indicate that the production cut could result in a 7 percent increase in oil prices, contributing to higher revenues for Saudi Arabia and OPEC+.
The bank also noted that the OPEC+ decision followed announcements from the United States and France regarding the release of oil from their strategic reserves.
It mentioned, "The refusal to refill the U.S. strategic oil reserve in the fiscal year 2023, despite West Texas Intermediate (the U.S. benchmark) crude reaching levels described as sufficient for refill, may have also contributed to OPEC+'s decision regarding the cuts."
The price forecast cuts came at a time when the bank reduced its forecasts for OPEC+ production, which includes the Organization of the Petroleum Exporting Countries (OPEC) and other producers, by 1.1 million barrels per day by the end of 2023.
