According to Goldman Sachs Group Inc., oil will rise above $100 a barrel this year and could face a serious supply problem in 2024, as excess production capacity is exhausted.
According to Goldman, with Russian oil exports likely to decline due to sanctions and Chinese demand expected to recover as the country ends its Covid Zero policy, prices will rise above $100 from the current level of $80.
The lack of industry spending on the production needed to meet demand will also be a driver of higher prices, and this capacity shortfall could become a bigger issue by 2024, analyst Jeff Curry said on the sidelines of a conference in Riyadh, Saudi Arabia. , on Sunday.
“The commodity supercycle is a sequence of price spikes with each higher high and each lower high,” said Curry, head of commodity research at Goldman. He said that by May there should be a shortfall in supply in the oil market compared to demand. He added that global producers may have higher utilization of unutilized capacity, which would be positive for prices.
Oil prices have fluctuated over the years, falling below $20 during the coronavirus pandemic before rising to near $130 after Russia’s invasion of Ukraine disrupted supplies that already fell short of global demand. was happening. Transportation fuel costs rose even higher as refineries maxed out capacity, before countries scrambled for alternatives.
Saudi Energy Minister Prince Abdulaziz bin Salman also made comments at the Riyadh conference on Saturday bemoaning the lack of investment in refining capacity, which has left the world in short supply. He reiterated that OPEC+ would be cautious in deciding whether to raise production.
Saudi Arabia is the de facto leader of the grouping, along with Russia, which brings together the Organization of the Petroleum Exporting Countries and other producers in an effort to balance supply and demand while keeping prices favorable for members. Prince Abdulaziz said OPEC+’s efforts to limit supply had saved oil markets during the collapse in demand during the pandemic.
Curry reiterated Goldman’s view that OPEC+ will reduce production limits and consider raising production later this year. This month an OPEC+ market monitoring committee recommended that the group keep oil production unchanged.
“Right now, we’re still balanced to a surplus because China still hasn’t fully rebounded,” Curry said. He said capacity could become a problem later this year, when demand exceeds supply.
“Are we going to run out of excess production capacity? Possibly by 2024 you start having a serious problem.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter that examines what leaders need to succeed. Sign up here.
