Goldman sees ‘high probability’ of OPEC cut, expects $110/b Brent in 2023

29 Nov 2022

Quantum Commodity Intelligence – The OPEC+ oil producer group is likely to take further measures to stem a price decline and try to balance the market, according to Goldman Sachs.

Jeff Currie, global head of commodities research at Goldman Sachs, said in an interview with CNBC he expects the producer alliance will need to discuss whether to accommodate further demand weakness in China and broader negative indicators.

“I think there is a high probability that we do see a cut,” he said.

OPEC+ agreed in early October to reduce production by a headline 2 million bpd from November, although analysts said only around half of this will result in actual cuts with most members already producing under quota.

The group meets in Vienna on 4 December to decide on the next phase of production policy.

According to sources Tuesday, the OPEC+ meeting has been switched from an in-person gathering to online, which some analysts suggested it could be a sign that OPEC+ will hold off from making any immediate decision.

Currie also addressed the sharp retreat in prices during November, citing a number of factors.

“First and foremost, it was the dollar. What is the definition of inflation? Too much money chasing … too few goods,” Currie told CNBC at the Goldman Sachs Carbonomics conference in London.

The second factor “has to do with Covid and China — and by the way, it’s big,” he continued. “It’s worth more than the OPEC cut for the month of November, let’s put it in perspective.

“And then the third factor is Russia is just pushing barrels on the market right now before that December fifth deadline for the export ban.”

Currie said the medium-term oil outlook for 2023 was “very positive” adding the bank plans to “stick to our guns” with a $110-a-barrel Brent crude forecast for next year.

He acknowledged, however, that there’s “a lot of uncertainty” ahead: “Demand is probably heading south again in China given what’s going on.”