Goldman Sachs raises its forecast for the price of Brent after the sudden production cut by OPEC

Goldman Sachs (NYSE:) raised its forecast for Brent crude futures prices after the surprise announcement from OPEC+ regarding the adoption of further production cuts.

The bank’s analysts said in a note on Sunday that the forecast for Brent crude for December 2023 was increased by $5 to $95 a barrel, while the forecast for December 2024 was raised by $3 to 100 a barrel.

The cut in price forecasts came as the bank cut its forecast for production from OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, by 1.1 million barrels per day by the end of 2023.

Brent crude futures rose to the highest level in almost a month, more than $ 86 a barrel, at the beginning of Monday’s trading, after the OPEC + announcement.

“Today’s sudden (production) cut is consistent with OPEC+’s new approach to acting proactively because it can do so without incurring significant market share losses,” the bank said.

He added that while the move was surprising, the decision reflects important economic and potential political considerations.

The bank estimates that reducing production could provide a seven percent increase in oil prices, which would contribute to increasing revenues for OPEC +.

The bank indicated that the OPEC + decision also came after the United States and France announced the release of stocks from their strategic petroleum reserves.

He said, “The refusal to refill the US Strategic Petroleum Reserve in the fiscal year 2023, despite the (US benchmark) West Texas Intermediate crude reaching low levels that were described as sufficient for refilling, may have contributed to OPEC +’s decision to cut as well.”

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