Brent shy of $73, US WTI sheds over 4% in 5 days on easing supply risk: Goldman Sachs in favor of OPEC+ cuts
- Brent crude fell 34 cents, or 0.46 per cent, to settle at $72.94 per barrel. US WTI crude futures fell 72 cents, or 1.05 per cent, to settle at $68 per barrel.
International crude oil prices edged lower in the previous session to log a weekly decline of more than three per cent, pressured by easing concern over supply risks from the Israel-Hezbollah conflict and the prospect of increased supply in 2025 even as the Organisation of Petroleum Exporting Countries and its allies (OPEC+) is expected to extend output cuts. According to news agency Reuters, investment banking major Goldman Sachs favours OPEC+ supply cuts, believing it will support near-term upside to Brent crude oil prices.
Brent crude fell 34 cents, or 0.46 per cent, to settle at $72.94 per barrel. US West Texas Intermediate (WTI) crude futures fell 72 cents, or 1.05 per cent, to settle at $68, from the last close before Thursday's Thanksgiving holiday. For the week, Brent shed 3.1 per cent, while WTI lost 4.8 per cent. Trading activity was muted because of the US public holiday. Back home, crude oil futures settled 0.56 per cent lower at ₹5,811 per barrel on the multi-commodity exchange (MCX).
What's weighing on crude oil prices?
-Four Israeli tanks entered a Lebanese border village, Lebanon's official news agency said on Friday. The ceasefire on Wednesday has reduced oil's risk premium, sending lower prices, despite accusations of violations by both sides.
-However, the Middle East conflict has not disrupted supply, which is expected to be more ample in 2025. The International Energy Agency (IEA) sees the prospect of more than one million barrels per day (bpd) of excess supply, equal to more than one per cent of global output.
-The OPEC+ group comprising allies including Russia delayed its next output policy meeting to December 5 from December 1. OPEC+ officials are expected to decide on a further extension to production cuts at the meeting. According to a poll conducted by news agency Reuters, Brent could average $74.53 a barrel in 2025.
-Analysts say following two postponements, OPEC+ has to consider the risk of further price weakness amid the release of currently unwanted barrels, not least because expectations for robust production from non-OPEC+ producers next year could lead to a crude surplus.
Goldman Sachs in favor of OPEC+ cuts
The investment bank major said crude production from Iraq, Kazakhstan, and Russia has declined in compliance with OPEC+ production cuts, supporting a modest near term upside to Brent prices. Goldman Sachs maintained its average Brent price forecast for 2025 at $76 per barrel.
Saudi Arabia is more likely to extend oil production cuts because of the recent price drop and we now think that oil production cuts will last until April 2025 instead of January, the investment bank said in a note dated Tuesday.
OPEC+, which includes members of the OPEC and allies such as Russia, is discussing a further delay to a planned oil output hike that was due to start in January. At its most recent meeting on November 3, OPEC+ agreed to delay a planned December output increase by a month.
"Any ramp-up in OPEC+ production will be gradual and data-driven," the bank said. Goldman added that rising compliance with OPEC+ production cuts suggests that the group's member countries are working together to stabilize oil prices.
Production from Iraq, Kazakhstan, and Russia declined by 0.5 million barrels per day (bpd) in November. Analysts say OPEC member countries are unlikely to unwind the voluntary production cuts in the short term, despite weaker prices.
However, despite OPEC+'s production cuts and delays to output hikes, Brent futures have mostly stayed in a $70-$80 range this year, and were trading below $74 on Tuesday. Last week, Goldman Sachs revised Brent crude prices to average around $80 per barrel this year, despite a 2024 deficit and geopolitical uncertainty, citing an anticipated surplus in 2025.
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