Major Banks Cut Oil Price Forecasts as Brent Falls Below Key Levels
Oil markets are facing a significant shift as Wall Street analysts revise their price forecasts downward, with crude expected to remain in the $60s range for the second half of 2024. Goldman Sachs Group Inc., Morgan Stanley, and Bank of America Corp. have all reduced their projections, citing concerns over OPEC+ production increases, U.S. economic pressures, and geopolitical uncertainties.
Goldman Sachs, which initially maintained its price projections, adjusted its Brent crude outlook to $65-$80 per barrel from its earlier forecast of $70-$85. According to Daan Struyven, head of commodities research at Goldman, the firm still expects Brent to stay above $70 per barrel in the coming months but no longer sees $70 as the price floor.
Brent crude futures are currently hovering around $71 per barrel, reflecting the impact of tariffs, shifting demand, and OPEC+ policy changes.
Wall Street Banks Lower Oil Price Projections
The downward revision by Goldman Sachs follows recent downgrades by Morgan Stanley and Bank of America, both of which now expect Brent to trade in the high $60s in the second half of the year.
- Morgan Stanley & Bank of America: Brent crude in the high $60s by H2 2024
- Goldman Sachs: Brent crude at $65-$80 per barrel
- Citigroup & JPMorgan Chase: Brent crude in the low-to-mid $60s by year-end
Long-Term Oil Price Expectations
- Citigroup remains the most bearish, forecasting Brent to average $60 per barrel in Q2 and Q3 before falling to $55 in Q4.
- JPMorgan Chase predicts an average price of $61 per barrel for 2025, with the potential to drop to $50 if U.S. President Donald Trump pushes for sanctioned Russian and Iranian barrels to stay in the market.
- Top oil trading firms, including Vitol Group and Gunvor Group, which had previously maintained a bullish stance, have also turned pessimistic about oil prices.
Oil’s Decline: A Relief for Consumers but a Risk for Producers
The decline in crude oil prices has been welcomed by U.S. President Donald Trump, as lower oil prices provide relief for consumers, businesses, and central banks that have struggled with high inflation in recent years.
However, the falling price of oil presents financial risks for oil producers, particularly in the American shale industry. Additionally, OPEC+—led by Saudi Arabia—is facing pressure as its production increase could further weigh on prices.
The decision by OPEC+ to raise output earlier this month initially led to mixed reactions, with some analysts maintaining their previous forecasts. However, with slowing U.S. economic growth and weaker demand signals, banks have adjusted their oil price outlooks downward.
Market Risks Affecting Oil Prices
Tariff Risks:
- Trump’s trade policies and tariffs on foreign imports could impact global demand.
- The escalation of trade wars could drive oil prices lower due to weaker industrial and consumer demand.
OPEC+ Production Strategy:
- Saudi Arabia and Russia’s output increases could lead to oversupply.
- OPEC+ is trying to balance market stability while maintaining revenues.
U.S. Economic Pressures:
- Slowing GDP growth and concerns over stagflation could reduce oil demand.
- The Federal Reserve’s monetary policy will play a crucial role in determining future demand.
Geopolitical Factors:
- Potential sanctions relief for Russia and Iran could increase global oil supply.
- Tensions in the Middle East and ongoing conflicts may still provide temporary support for prices.
Wall Street’s 2025 Oil : Limited Upside, Potential for Further Declines
Looking ahead to 2025, analysts see little room for upside in crude prices. JPMorgan Chase’s projections suggest Brent crude may average $61 per barrel, but in a worst-case scenario, it could dip to $50 per barrel if Trump pushes to keep Russian and Iranian barrels in the market.
With OPEC+ facing production pressures, U.S. economic growth under strain, and trade policies creating uncertainty, oil markets remain vulnerable to further price declines in the coming months.
