Goldman Measures Near-Term and Longer-Term Ramifications of Hamas Attacks -- OPIS

The commodities team at Goldman Sachs has reacted to the surprise attacks in Israel Saturday by Hamas, with an eye toward near-term and longer-term impacts on global supply and demand balances.

The bank immediately dismissed the likelihood of any normalization in the relationship between Saudi Arabia and Israel. An exclusive story in The Wall Street Journal Saturday detailed U.S.-led efforts to broker a deal where the Saudis might put more oil on the market in 2024 if the Saudis recognized Israel and negotiated a defense pact with the U.S. Goldman and other banks now believe that the weekend attacks dramatically reduce any chance of such action.

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Goldman said it believes the Saudis will unwind some portion of the 1-million-barrel-a-day voluntary production cut that was implemented for the second half of 2023. However, the bank said it now believes that Saudi Arabia will retain production at 9 million b/d through the first quarter of 2024 and only afterward start putting an extra 250,000 b/d of crude per quarter on the market. Price declines in late September and early October as well as no evidence of large draws in global crude stocks reduce the possibility of an early unwinding of the voluntary cut.

With stagnant Saudi output now expected in early 2024, Goldman raised price targets to $104/bbl for fourth-quarter 2023 Brent, reflecting a hike of $4/bbl from previous analysis. If the Saudis put 1 million b/d more crude on the market in early 2024, the price projections drop by $8/bbl to $92/bbl. The latter outcome now has a much lower probability attached.

Goldman highlighted new prominent downside risks to Iranian oil production. Before Saturday, a de-escalating trend in Arab/Israeli relations contributed to more Iranian production in 2023. With the possibility of broader regional tensions, the bank assumes that Iran crude production growth will slow down significantly from about 3.2 million b/d in August 2023 to 3.25 million b/d by January 2024. Each 100,000 b/d decline in Iran output in 2024 might add about $1/bbl to the end-2024 Brent price forecast, the bank said.

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--Reporting by Tom Kloza, [e-mail]; Editing by Michael Kelly,

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(END) Dow Jones Newswires

October 09, 2023 10:52 ET (14:52 GMT)

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