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Wall Street investment banks have raised their price forecasts for oil after OPEC+ moved to slash production by around 2 million barrels per day and squeeze supply in a snub to the Biden administration and its pleas to the cartel to pump more crude.
While the White House reacted negatively to OPEC’s decision by accusing the alliance of “aligning with Russia” and calling the move “shortsighted,” Saudi Energy Minister Abdulaziz bin Salman said it was about bringing stability to markets.
Some analysts have said OPEC’s cuts are meant stem the decline in oil prices, which hit about $120 per barrel during spring but have since slumped to roughly $90 per barrel on fears of an economic slowdown.
Wall Street, meanwhile, responded to news of the OPEC cuts by boosting their bets on the price of crude.
The oil team at Goldman Sachs raised their fourth-quarter 2022 Brent crude forecast by $10 to $110 per barrel.
“All the developments we have seen on the supply side at this point very much sets the stage for what we believe will be higher prices into the end of this year,” Damien Courvalin, head of energy research at Goldman, told Bloomberg TV.
Morgan Stanley analysts said in an Oct. 5 note that they expect Brent prices to hit $100 per barrel “quicker than we estimated before.” The team raised its first-quarter 2023 Brent price forecasts from $95 per barrel to $100, while keeping the outlook unchanged for the subsequent three quarters.
