Goldman Sachs: OPEC Cuts to Push Oil Prices into $90s Range This Year

Emmanuel Addeh in Abuja

The latest production cuts by the Organisation of Petroleum Exporting Countries (OPEC) will prompt a draw in oil inventories, sending prices into the low $90s, Goldman Sachs Group, has said.

In a Bloomberg TV interview, the organisation’s Global Head of Commodities Research, Jeffrey Currie, said that the decision by the oil cartel will mostly reflect in the fourth and fifth quarters of this year.

“You’re going to be seeing substantial physical inventory draws because of these OPEC production cuts, particularly in the third and fourth quarter,” he said. “That’s going to push us up into the low $90s,” he added.

Oil prices have remained weak in the immediate wake of Saudi Arabia’s pledge to cut more barrels as lacklustre demand and ongoing fears about economic growth shadow the outlook.

Money managers currently hold the most bearish stance across all major oil contracts in more than a decade, exchange and commodity futures data compiled by Bloomberg.

Higher interest rates have made it too expensive to keep oil in storage and investor interest is unlikely to return until inventories start to decline, Currie said. The net cost to hold physical inventories is at about 13-15 per cent in the current environment.

Brent crude price, Nigeria’s benchmark is currently in the $70s, although the country has been unable to take advantage of high prices due to prolonged underproduction.

Meanwhile, the International Energy Agency (IEA) has made a forecast that China will account for 60 per cent of global crude oil demand growth in 2023.