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Goldman Sachs assessed that the sanctions imposed on Russia would likely reduce their oil exports and elevate prices from the current $80 level above $100 as demand is forecasted to recover in China after lifting its zero-Covid policy. At a recent event held in Saudi Arabia, analyst Jeff Currie highlighted how insufficient investment for production meant there would be an inadequate capacity to meet customer requests by 2024, thus further driving up prices.
Goldman Sachs: The Effort to Find Alternatives Was Taken to the Second Plan
According to Currie, Head of Commodities Research at Goldman Sachs, oil markets should witness a supply-demand gap in May that would drive prices higher by depleting the remaining storage capacity worldwide.
When the pandemic hit, oil prices plummeted below $20. Slowly but surely, however, they made a comeback and even rose to as high as $130 during the Russian invasion of Ukraine – all due to an already shortage in global supply that outstripped demand. Subsequently, this led to sky-high transport fuel costs at maxed-out refineries before some countries switched their focus to alternative solutions, ultimately bringing these prices back again.
OPEC+ Will Be Cautious While Increasing Production
At the gathering held in Riyadh on Saturday, Saudi Energy Minister Prince Abdulaziz bin Salman highlighted that inadequate investment into refinery capacity is likely to lead to a shortfall of supply available for global distribution. He underscored his willingness to exercise caution when choosing OPEC+ production increases.
Prince Abdulaziz reminded the world that OPEC+ had been a powerful ally in mitigating volatility and sustaining healthy prices within oil markets, with Saudi Arabia and Russia serving as key leaders through their initiative to bring together members of the Organization of Petroleum Exporting Countries. Their efforts were particularly crucial during the pandemic-induced decline in demand last year.
Production Is Expected To Increase Towards The End Of The Year
Currie reinforced Goldman’s hypothesis that OPEC+ will relax production limits and attempt to expand output in the upcoming months. This month, a market watch committee associated with OPEC+ proposed that the group sustain oil production levels steadily. Currie stated that capacity might become an issue when supply surpasses demand this year: “Will our surplus capacity run out? Potentially, by 2024, we could experience a serious problem,” he said.
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