According to Goldman Sachs, if both Russia and Saudi Arabia continue to restrict supply, oil prices could rise to $107 – equivalent to the early stages of the Ukraine conflict.
On September 5th, Russia and Saudi Arabia – the two leading countries of the Organization of Petroleum Exporting Countries and its allies (OPEC+) – jointly announced the extension of oil supply restrictions until the end of this year. Accordingly, Saudi Arabia will continue to reduce production, while Russia will limit exports. This announcement caused Brent crude oil to rise above $91 a barrel – its highest level in 10 months.
Previously, Goldman Sachs forecast Brent crude oil prices at $86 in December and $93 per barrel by the end of next year. Now, following announcements from Russia and Saudi Arabia, the bank says its forecasts "face two upside risks."
One risk is that if Saudi Arabia's supply decreases by another 500,000 barrels a day, Brent crude prices could rise by $2. The second risk is the possibility that OPEC+ will continue to extend the production cuts by its members.
Previously, they predicted that OPEC+ would gradually restore production in January 2024. But now, the bank is leaving open the possibility that OPEC+ will maintain the current level of cuts. "If OPEC+ maintains 2023 production levels until the end of 2024 and Saudi Arabia is slow to restore production," Brent crude oil prices will reach $107 by December 2024.
Rising oil prices could help Saudi Arabia balance its budget and provide Russia with additional revenue. However, triple-digit prices could prompt US shale oil companies to increase supply, thereby driving prices down. High prices could also accelerate investment in clean energy.
The US also doesn't want oil prices to reach $100 a barrel, due to "the political importance of gasoline prices." No US president wants gasoline prices to skyrocket, especially ahead of an election.
When asked about Russia and Saudi Arabia's moves to tighten supply, US National Security Advisor Jake Sullivan said that US President Joe Biden is focused on "doing everything in his power to lower gasoline prices for consumers." "Our ultimate goal is a stable, efficient global energy supply," he affirmed.
Ha Thu (according to CNN)
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