Wall Street cutting oil price forecasts on OPEC+ production

Goldman Sachs and Morgan Stanley are lowering their price forecasts on crude oil (BZ=F, CL=F) as OPEC+ plans to increase its production output this October and conflicts escalate in the Middle East between Israel and Hezbollah forces in Lebanon.

Yahoo Finance senior business reporter Ines Ferré highlights these revised price forecasts and what it means for oil producers.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Luke Carberry Mogan.

Video Transcript

Goldman Sachs and Morgan Stanley, both lowering their oil price forecasts as the two banks say they expect a surplus in the crude oil market.

This comes as OPEC plus is set to increase production come October.

Now, as geopolitical tensions bubble up across the world, what does this tell us about the reaction function of OPEC and the impact that could have on oil prices moving forward our very own and as for, joins us with more.

Hey, Madison, yeah, and Goldman Sachs analyst lowered their forecast for Brent by $5 to a range of 70 to $85.

It also lowered its 2025 forecast for oil to an average of $77 for Brent now, the reason being a lot of this has to do with increased supply and a lot of that coming from oil allowance or OPEC plus, now we, uh, the analysts at Goldman Sachs said.

We still assume that eight plus countries, which previously announced the 2.2 million barrels per day of extra voluntary cuts, start to gradually unwind these cuts in October of 2024.

The analysts, also writing in their note that if decides to go ahead with the production increases.

The market is potentially shifting from a short run equilibrium to a more long run and likely optimal strategy where it's basically disciplining non OPEC supply supports.

UH, you also have Morgan Stanley, which has lowered its target for Brent crude as well for the fourth quarter of 2024 to $80.

Uh, and in the fourth quarter of 2025 to $75.

Previously, it was at $76.

You you have.

What is going on now is the market expectation that will start unwinding those voluntary cuts that's going to add supply into the market and that will weaken.

The market is really between a rock and a hard place because it wants to keep those prices elevated.

But if it doesn't start to unwind its cuts, its members will start to lose more and more share.

The US is at peak production levels.

Drilling technologies are very advanced right now, and the big oil companies are expecting demand to go forward so they will keep producing.

If that happens, then these other countries from OPEC will start to lose market share guys all right and that really great breakdown of those calls from Morgan Stanley and Goldman.

And, of course, the broader space when it comes to OPEC Plus and the oil market.

Thank you so much.