Goldman Sachs has revised its 2025 forecast for Brent crude oil prices, lowering its average prediction to $77 per barrel from a previous estimate of $82. The investment bank cited higher global oil inventories and a decline in demand from China as significant factors influencing this more cautious outlook. Additionally, Goldman Sachs adjusted its forecast range for Brent crude, now expecting prices to hover between $70 and $85 per barrel, a reduction of $5 per barrel from earlier predictions.
The revision comes as the global oil market faces a mix of challenges. Goldman Sachs highlighted several risks that could further push prices down, including high spare capacity among producers, potential trade tensions, and the possibility that the Organization of the Petroleum Exporting Countries (OPEC) and its allies might fully reverse the output cuts they have in place through 2025. “The risks to our $70-85 range skew to the downside,” the bank noted, reflecting a growing sense of uncertainty within the industry.
OPEC+ and Market Dynamics
OPEC and its allies, collectively known as OPEC+, have been key players in stabilizing the oil market by implementing a series of production cuts since late 2022. These measures were aimed at countering the effects of fluctuating demand and ensuring a more balanced market. As of August 1, OPEC+ confirmed a plan to start gradually unwinding its most recent cuts of 2.2 million barrels per day from October. However, the coalition also indicated that it might pause or reverse these plans depending on market conditions, adding another layer of unpredictability to the oil price outlook.
The group’s decisions are closely watched by analysts and traders, given their significant influence on global oil supply. Despite their efforts, the market remains volatile, partly due to slower economic growth in key markets like China. OPEC recently revised its forecast for global oil demand growth in 2024, reducing it to 2.11 million barrels per day, down from an earlier estimate of 2.25 million barrels per day. This reduction aligns with broader concerns about the potential for weaker demand, particularly as the energy transition gains momentum.
Impact of China’s Slowing Demand and Rising Inventories
China’s slower economic growth, increased adoption of electric vehicles, and a rise in the number of trucks powered by liquefied natural gas (LNG) have also contributed to a dampened outlook for global oil demand. Last week, Morgan Stanley adjusted its own forecast for 2024 global oil demand growth, primarily due to these factors. The combination of these trends underscores the shifting landscape of energy consumption, which is increasingly leaning towards cleaner alternatives and away from traditional fossil fuels.
Several other brokerages have also updated their forecasts for Brent and West Texas Intermediate (WTI) crude prices, reflecting a mixed but generally cautious view of the market. For instance, Citi Research now projects Brent prices to average $60 per barrel in 2025, significantly lower than its previous forecast. Meanwhile, Barclays and BMI remain more optimistic, with their forecasts for 2025 Brent prices at $90 and $82 per barrel, respectively.
As the market navigates these challenges, the outlook for oil prices remains uncertain, shaped by a complex interplay of supply dynamics, geopolitical risks, and shifting demand patterns. While some analysts see potential for prices to stabilize or even rise, others caution that the risks of further declines cannot be ruled out.
Source: Reuters
