Goldman Sachs cuts its expected oil price range by $5

Falling oil demand from China, high inventories and rising US shale production prompted Goldman Sachs to cut its forecast range for Brent oil by $5 to $70-85 a barrel.

Commercial inventories were flat in the peak summer demand season, contrary to expectations for draws, Wall Street bank analysts wrote in a note published by Investing.com.

Higher U.S. supply offset some of the seasonal demand, according to Goldman Sachs.

Efficiency gains among US producers boosted shale supply by 200,000 barrels per day (bpd) above investment bank expectations.

Higher supply from America and possibly from OPEC+ later this year and into 2025 has led Goldman Sachs to forecast Brent crude prices to average below $80 a barrel next year.

The current forecast is now for Brent to average $77 a barrel as OPEC+ could opt for a strategic move to add supply and punish non-OPEC+ growth, according to Goldman’s note published by Bloomberg.

OPEC+ could decide to add supply to the market in a move that could “strategically discipline non-OPEC supply,” Goldman Sachs analysts wrote.

“Prices could outperform significantly in the near term, especially if OPEC strategically discourages stronger US shale growth or if a recession reduces oil demand,” the bank’s analysts noted, referring to a scenario where Brent could trade lower than its price forecast.

Morgan Stanley recently revised its oil price forecasts lower, reflecting expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank now anticipates that while the crude oil market will remain tight through the third quarter, it will begin to stabilize in the fourth quarter and potentially move into surplus by 2025.

Morgan Stanley cut its fourth-quarter forecast to $80 a barrel, down from $85, and now expects prices to gradually fall to $75 a barrel by the end of 2025, slightly more lower than their previous estimate of $76.

By Charles Kennedy for Oilprice.com

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