Goldman Sachs Cuts 2024 Oil Price Projection by 12% Amid Surging US Production

Goldman Sachs revised its forecast for the average oil price next year, reducing it by 12% due to increased production in the United States. According to a note from the Wall Street bank on Sunday, it now predicts that Brent, the global oil benchmark, will average $81 a barrel in 2024, a decrease from its earlier estimate of $92 a barrel. The bank also anticipates Brent to reach a peak of $85 a barrel in June of next year.

The banks' analysts stated that the main factor behind the adjusted price forecasts was the continual increase in drilling speed and well completion intensity in the United States. As of 9:58 am ET on Monday, Brent and West Texas Intermediate crude, the US benchmark, had both risen by 3.5% to reach $79 and $74 per barrel, respectively.

BP's announcement of pausing shipments through the Red Sea due to increased attacks by Houthi militants in Yemen led to an upswing. Despite this, oil contracts remain lower than the 13-month highs achieved in September. The Organization of the Petroleum Exporting Countries and its allies have also stated their decision to extend a supply cut in an attempt to support prices, but prices continue to fall.

General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia in May 2018.

Ahmed Jadallah/Reuters

OPEC+ members agree to significant voluntary oil production cuts

The United States' record-breaking oil production has contributed to the decline in prices. The US Energy Information Administration predicts that crude oil output will reach an unprecedented average of 12.9 million barrels a day this year and is projected to hit another record average of 13.1 million barrels a day in 2024.

Additionally, markets are concerned about a potential decrease in crude oil demand, particularly in China, as the country continues to show indications of a weakening economy.

Goldman Sachs stated that the supply cuts by OPEC+, a possible economic recovery in China, and a "modest" risk of a US recession, along with other factors, are expected to restrict the decline in oil prices. According to Craig Erlam, a senior market analyst at Oanda, investors' optimism regarding potential interest rate cuts by major central banks globally has increased the likelihood of a softer landing, which could positively impact oil demand.

A "soft landing" describes a successful campaign by a central bank to lower inflation through interest rate hikes without tipping the economy into recession.