Wall Street Worries About Oil as OPEC Plus Plans to Increase Supply Goldman Sachs Lowers Forecast
Goldman Sachs and Morgan Stanley lower Brent crude forecasts below $80 for 2025 due to rising global oil supplies. OPEC+ reversal of output cuts may further impact oil prices
Wall Street's outlook for oil prices in 2025 is becoming more cautious as leading financial institutions, including Goldman Sachs and Morgan Stanley, have lowered their price forecasts. The revised forecasts come amid increasing global oil supplies, particularly from OPEC+.
Goldman Sachs now predicts that global benchmark Brent crude will average $77 per barrel in 2025, while Morgan Stanley estimates prices will range between $75 and $78. Both banks anticipate that the oil market will experience a surplus in the next 12 months, driving prices lower.
OPEC+ may reverse its voluntary production cuts in an effort to control the market by "strategically disciplining non-OPEC suppliers," according to a report from Goldman Sachs analysts. However, the analysts warn that crude prices could fall further, depending on several key factors, including the global economic outlook.
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Oil prices have come under pressure in recent months due to concerns over slowing demand growth in China, the world’s largest oil importer, as well as rising production from non-OPEC+ nations. OPEC+, led by Saudi Arabia and Russia, has previously cut output to support prices, but the group is now considering easing those restrictions, potentially altering its approach.
Morgan Stanley analysts noted that while the crude oil market remains in a slight deficit, it is unlikely to tighten further. They project that the market will reach equilibrium by the fourth quarter of 2024 and could move into surplus by 2025.
Currently, Brent crude is trading around $81 per barrel and has averaged $83 per barrel this year. However, Goldman Sachs has presented several scenarios that could drive prices lower. If China's oil demand remains flat, Brent could fall to $60 per barrel. Similarly, if the U.S. imposes a 10% tariff on imports, Brent could drop to $63. In the case that OPEC fully reverses its additional 2.2 million barrels per day of cuts by September 2025, prices could sink to $61 per barrel.
This shift in sentiment highlights the complex factors influencing the global oil market, from geopolitical developments to shifts in supply and demand. As OPEC+ prepares for its next moves, oil prices could experience increased volatility throughout 2024 and beyond.
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