Iran Energy News Oil, Gas, Petrochemical and Energy Field Specialized Channel
Related Articles
Spare oil production capacity at the highest quartile in history is weighing on Brent crude prices, and time spreads have looked undervalued since the summer, according to Goldman Sachs.
The expectations for a large surplus next year are also likely weighing on the deferred time spreads, the investment bank said in a recent note.
“Nevertheless, we believe neither currently low inventory levels nor our expected 2025 surplus of 0.37mb/d warrant the oversupply priced in the futures curve,” the Wall Street bank’s analysts wrote.
“Deferred time spreads remain depressed and vulnerable to the downside risks in the medium term from tariffs and higher OPEC+ production,” the analysts at Goldman Sachs said.
The OPEC+ group earlier this month decided to delay the start of the easing of the 2.2 million bpd cuts to April 2025, from January 2025. The group also extended the period in which it would unwind all these cuts into the following year, until September 2026.
Days ahead of the OPEC+ meeting, Goldman Sachs said it Brent Crude oil prices are set to average $76 per barrel next year, down from an expected average of $80 a barrel in 2024, amid an expected surplus on the market.
“Our base case is that Brent stays in a $70-85 range, with high spare capacity limiting price upside, and the price elasticity of OPEC and shale supply limiting price downside,” Goldman Sachs said.
The OPEC+ decision from early December has led analysts to reduce their estimates of a surplus, but all are still expecting an oversupply on the market next year, due to the rising non-OPEC+ production and expectations of modest oil demand growth globally.
Non-OPEC+ supply growth, mainly from the United States, Brazil, Guyana, Canada, and Argentina, will weigh on oil prices in case global demand growth continues to be modest, according to analysts.
