Goldman sees upside risks for Brent near term

Brent crude prices have retreated to the low-to-mid $70s a barrel, which reflects market confidence in a large 2025 surplus, according to Goldman Sachs, but the influential investment bank sees upside risks in the short term.

At 08:55 ET (13:55 GMT), Brent crude traded 0.6% lower to $73.78 a barrel, 4% higher this week, but just less than 4% lower so far this year. 

Brent oil prices are on track to average roughly $80/bbl this year, analysts at Goldman Sachs said, in a note dated Nov. 21, but have declined to the low-to-mid $70s despite a 2024 deficit and geopolitical uncertainty. 

“This reflects market confidence in a large 2025 surplus, which has depressed positioning and valuation,” the bank said.

Its base case is that Brent stays in a $70-$85 range, with high spare capacity limiting price upside, and the price elasticity of OPEC and shale supply limiting price downside.  

However, the risks of breaking out are growing, as Goldman sees upside risks to prices in the short term, with Brent rising to the mid-$80s in the first half of 2025 if Iran supply drops one million barrels a day on tighter sanctions enforcement. 

The medium-term price risks, however, skew to the downside given high spare capacity. 

“We estimate that Brent drops to the low $60s in 2026 in a 10% across-the-board tariff scenario or if OPEC supply rises through 2025,” Goldman added.

That said, the bank still forecasts Brent to average $76/bbl in 2025. 

“This modest price upside reflects our forecast that the price boosts from a reversal in low valuation and from strategic restocking will outweigh the drag from a modest surplus,” Goldman added.

 

Source: Investing.com