Why Another Drawdown Of America’s Oil Reserve Could Happen

Despite the significant increase in crude oil prices over the last two months, analysts at Goldman Sachs told investors Monday that it does not expect the international Brent index price to move above $100 in the coming weeks. While recognizing the increased geopolitical risk and expectations of stronger global demand for crude and refined products in the 2nd half of 2024, Goldman bases its assessment on anticipation that the OPEC+ cartel will move to raise its export quotas when it next meets in June.

The motivation there for the OPEC+ ministers would be to avoid the inevitable demand destruction that $100/barrel oil prices have caused in the past. It is a motivation that makes sense for countries whose long-term economic health remains highly dependent on strong demand for crude oil. The question, though, becomes how quickly OPEC+ is willing to act to readjust its production targets, given that the group acted just last week to reaffirm commitments to lower quotas it has had in place since last summer. With the Brent price already over $91/bbl and the US summer driving season rapidly approaching, the prospect of a near-term rise to the $100 mark is not really all that remote.

Goldman’s assessment came just 11 days after analysts at competitor JP Morgan said oil prices could hit $100 by September. They based that conclusion on ongoing market factors after Russia announced deeper cuts in its own national production of half a million barrels per day to bring it more in line with the OPEC+ targets.