Goldman Sachs forecasts that Brent crude oil prices may increase in the fourth quarter, possibly reaching $77 per barrel. This optimistic outlook is influenced by several factors, including a recent interest rate cut by the Federal Reserve and strong economic data from the U.S. Additionally, the formation of Hurricane Helene serves as a reminder that hurricanes can disrupt oil supply.
Last week, Brent crude prices surged by 4% due to rising tensions in the Middle East. However, the market faced a selloff on Monday after Iranian President’s signals suggested a move towards peace. As of Tuesday morning, Brent was trading at approximately $74.35 per barrel for December delivery.
Goldman’s analysis indicates a global supply decrease of about 500,000 barrels per day, driven by lower production from Canada, Russia, and U.S. shale regions. At the same time, global demand is increasing, especially in OECD countries and China. Further easing of Chinese policies could boost this demand even more.
Although much of the recent price recovery occurred in long-term oil contracts, Goldman believes that the difference between one-month and 36-month Brent prices should be $8 higher than the current levels. They also pointed out that Brent’s implied volatility is low, sitting in the 17th percentile.
Goldman reiterated its previous recommendation for European distillate trading, although it acknowledged that this strategy has underperformed. Since March, a gasoil/Brent crack spread trade they recommended has lost nearly $8 per barrel.
Overall, Goldman sees the potential for rising oil prices in the near future, but warns that market volatility and geopolitical events could keep traders cautious.
In a related development, Russia is reportedly preparing for reduced oil revenues in its three-year budget. This plan accounts for lower prices and a relaxed tax regime, which is expected to decrease oil revenues by 14% over the budget period.
You Might Be Interested In
- How to Analyze the Oil Market?
- How to Bet on Oil Prices Rising?
- How to Buy Crude Oil on TD Ameritrade?