(Bloomberg) — Oil prices are poised for gains as Thursday’s OPEC+ decision to press ahead with planned production increases will not derail the current structural bull market, according to analysts at Goldman Sachs Group Inc.
Most Read From Bloomberg
The investment bank sees “very clear upside risks” for its forecast that the price of Brent oil will average $85 a barrel in 2023.
US shale oil producers will be cautious in their spending plans for 2022 due to recent low prices. While there is slower growth in shale oil production, in the meantime, OPEC’s spare capacity will decline more quickly than if the organization decided to pause production increases, Goldman said. This is particularly so if there is no agreement to allow more Iranian oil on the market next year.
Goldman analysts said the recent price drops, amid fears that the omicron alternative to the coronavirus will damage demand, have been overstated and that current prices offer “disguised opportunities” for reinvestment. Brent crude futures fell to $66 a barrel earlier on Thursday, following the OPEC+ decision, and later rebounded to $70 as the producer group kept the door open for more immediate adjustments, if needed.
In the short term, the oil market needs more information about the virulence of the latest coronavirus variable for oil prices to start a recovery, and may need more evidence of a tight physical market to push oil prices above $80, Goldman said.
Goldman also said that while OPEC+ has repeated caution over the past year, Thursday’s decision aligns with previous decisions to add supply in a weaker demand environment. It also eases tensions with the US administration, which coordinated the release of national stockpiles among major oil consuming nations last month after US crude prices rose to a seven-year high.
Most Read Bloomberg Businessweek
© Bloomberg LP 2021