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Goldman Sachs predicts Brent price will rise to $100 by December

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Brent price rise

Analysts at Goldman Sachs have revised their forecast for Brent – they now expect Brent prices to rise to $100 by December, not mid-year. The forecast for the average price of oil this year has been lowered to $92 from the previously expected $98.

U.S. investment bank Goldman Sachs has revised its forecast for the price of Brent oil – it now expects it to reach $100 per barrel by December 2023, rather than mid-year, reports Bloomberg. On average, Brent will cost $92 a barrel in 2023, rather than the $98 they previously expected, according to the bank’s analysts’ forecast.

“This revision reflects a moderate softening of our forecast for 2023,” Goldman Sachs’ analyst team said in a note.

Brent crude price rise – reasons

Goldman Sachs experts believe China’s economic recovery due to softening COVID-19 policies will lead to shortages in oil markets by June this year and “reveal structural underinvestment” in the industry. Also, OPECcountries are likely to increase production in the second half of 2023 to balance supply and demand, analysts added.

Back in January, Goldman Sachs allowed the Brent price to rise to $110 by the third quarter of 2023 if China’s coronavirus restrictions were fully lifted. Beijing began to wind down a policy of zero tolerance for COVID-19 in early December after mass protests.

UBS analysts, in turn, predicted the growth of Brent to $110 a barrel in the second half of 2023. According to them, the energy problems of 2022 (for example, the redirection of Russian supplies and the chronic underinvestment in the oil industry) will be relevant this year, but unlike last year, when most coal prices rose, in 2023 it will be oil.

The optimistic forecast by Goldman Sachs contradicts the expectations of experts at Citigroup, writes Bloomberg. Analysts of the latter believe that the market is well supplied and the cost of Brent is likely to fall by another $10 per barrel by the end of 2023. As of 16:58 Moscow time on February 10, Brent cost $85.73 per barrel, adding 1.46%. Oil is rising in price on Friday amid news that Russia will cut production by 500,000 bpd in March, Reuters writes.

Earlier we reported that the founder of Andurand Capital predicted oil at $140 per barrel.

Commodities

Oil prices advance on tighter supply outlook

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By Ahmad Ghaddar

LONDON (Reuters) – Oil prices firmed on Thursday, following two consecutive sessions of decline, as investors saw a tighter supply outlook ahead, while the OPEC+ producer alliance was widely expected to stay the course on its current production cuts.

Brent crude futures for May were up 91 cents, or 1.1%, at $87 a barrel while the more actively traded June contract rose 75 cents, or 0.9%, to $86.16 at 1101 GMT. The May contract expires on Thursday.

U.S. West Texas Intermediate (WTI) crude futures for May delivery were up 89 cents, or 1.1%, to $82.24 a barrel.

Both benchmarks were on track to finish higher for a third consecutive month.

In the prior session, oil prices were pressured following last week’s unexpected rise in oil and gasoline inventories, driven by a rise in crude imports and sluggish gasoline demand, according to Energy Information Administration data.

However, the crude stock increase was smaller than the build projected by the American Petroleum Institute, and analysts pointed out that the increase was lower than what would be expected for this time of year.

“We … expect U.S. inventories to rise less than normal in reflection of a global oil market in a slight deficit,” SEB analyst Bjarne Schieldrop said. “This will likely hand support to the price going forward.”

Also providing support to prices were U.S. refinery utilisation rates, which rose 0.9 percentage points last week.

Recent disappointing inflation data affirms the case for the U.S. Federal Reserve to hold off on cutting its short-term interest rate target, a Fed governor said on Wednesday, but he did not rule out trimming rates later in the year.

“The market is converging on a June start to cuts for both the Fed and the European Central Bank,” JPMorgan analysts said in a note. Lower interest rates support oil demand.

Investors will watch for cues from a meeting next week of the Joint Monitoring Ministerial Committee of producer group the Organisation of Petroleum Exporting Countries (OPEC) amid supply concerns over geopolitical risks.

OPEC+ is unlikely to make any oil output policy changes until a full ministerial gathering in June.

© Reuters. An aerial view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. Picture taken with a drone. REUTERS/Tatiana Meel

“[We] do not see any indications that the recent run-up in prices due to the heightened Russian infrastructure risk will prompt any policy reversal at next week’s JMMC meeting.” RBC analyst Helima Croft said.

“Any serious shift will likely have to wait until the June 1 ministerial meeting, and even then, we believe the group will be very judicious when it comes to unwinding any cuts.”

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Commodities

Firmer oil prices expected as demand builds and supply curbs persist: Reuters poll

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By Sherin Elizabeth Varghese

(Reuters) – Oil prices will gain some momentum this year as demand picks up and output curbs by the OPEC+ producer group continue to squeeze supply that is already being pressured by military conflicts, a Reuters poll showed on Thursday.

A survey of 46 economists and analysts forecast that would average $82.33 a barrel in 2024, up from the $81.13 consensus projection in February. expectations were raised to $78.09, up from the $76.54 forecast last month.

This was the first upward revision in 2024 consensus forecasts since the October poll.

“We see the oil price rally going further until the summer months,” said Florian Grunberger, senior analyst at data and analytics firm Kpler. “This is due to the geopolitical risk premium and the interests of OPEC+ members, coupled with increasing demand in China.”

Oil prices have added more than 12% in the quarter so far, fuelled by geopolitical tensions in the Middle East, Houthi attacks on Red Sea shipping and recent Ukrainian drone attacks on Russian refineries. [O/R]

On the demand side, the overall consensus was roughly in line with the 1.3 million barrel per day (bpd) rise for 2024 projected by the International Energy Agency.

The IEA’s forecast was far less bullish than that of OPEC, which expects demand growth at 2.25 million bpd this year and said the 2024 and 2025 growth trajectories of India, China and the United States could exceed current expectations.

“Traders have now fully absorbed the implications of the OPEC+ supply cut extensions at a time when demand is proving more robust than expected,” said Matthew Sherwood, lead commodities analyst at the Economist Intelligence Unit.

© Reuters. FILE PHOTO: A person uses a fuel nozzle to fuel up a car at a petrol station in Vienna, Austria March 18, 2022. REUTERS/Leonhard Foeger/File Photo

OPEC+ members led by Saudi Arabia and Russia are unlikely to make any oil output policy changes until a full ministerial gathering in June, three OPEC+ sources told Reuters.

“Convincing OPEC+ members to under-produce as a group to maintain oil prices above a certain level is not going to be easy,” said Suvro Sarkar, energy sector team lead at DBS Bank, pointing to rising surplus capacity and the loss of OPEC+ market share to non-OPEC+ producers such as the United States.

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Analysis-Pasta makers cheer Turkey as its durum wheat flows abroad

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By Ceyda Caglayan and Gus Trompiz

ISTANBUL/PARIS (Reuters) – Turkey’s spectacular breakthrough as an exporter of durum wheat has spared pasta fans another year of price pain and the country is poised to remain a crucial source of the ingredient prized in Mediterranean cuisine.

On track to be the world’s second-largest durum exporter in 2023/24, Turkey has helped fill a supply gap caused by a second drought in three years in top supplier Canada and stifled a price surge seen at the season’s start.

Global stocks of durum are still forecast to hit a three-decade low this season, according to the International Grains Council, an intergovernmental body. But Turkish shipments have averted an immediate shortfall and kept durum in line with easing world prices of staple grains.

Previously a net importer of the hard wheat whose milled flour is used to make pasta, couscous and certain types of bread in the Mediterranean region, Turkey has taken the market by surprise by exporting around 1.5 million metric tons of durum so far in the 2023/24 season ending in June.

“Turkey, by entering global markets as an exporter, changed the game,” Aykut Goymen, chairman of Turkey’s pasta industry association, said.

“I can say that it was not a one-off thing and it is sustainable for Turkey to be a durum exporter in the coming years.”

Turkey’s better-than-anticipated crop last year left stocks brimming following hefty imports made in response to high inflation and earlier drought.

Attractive prices for farmers, including a near 30% rise in the state’s purchase price last year, as well as investment in irrigation, have boosted sowing and yields. Weakness in the lira during an economic crisis also made Turkish durum more competitive overseas.

With growers planting more and weather staying clement so far, Turkish production is widely expected to set a second straight record this year above 4 million tons.

That comfortably surpasses the country’s annual domestic consumption of up to 3 million tons. Demand from its large export-focused pasta industry has been curbed by a shift to using cheaper soft wheat for cost-conscious markets in Africa and Latin America.

Analysts anticipate another year of substantial exports, even if Canadian output recovers, with the 2024/25 volume seen potentially exceeding 1 million tons again.

Turkish shipments, along with sizeable flows from Russia and Kazakhstan, have been a boon for importers in Italy.

“Pasta producers bought durum from Turkey because it was offered to us at competitive prices,” said Vincenzo Divella, co-CEO of the eponymous Italian pasta company.

“We had a big problem in Canada … In our country, the season was disastrous because of the weather and rains.”

The Turkish crop is seen in Italy as a good-quality option, though Canadian durum remains the benchmark for many processors.

Lower durum prices, which have fallen by at least one-fifth to return to where they were before last summer’s panic over Canada’s drought, are bringing relief for shoppers. Retail pasta prices in Italy in the two months to Feb. 25 were down 3.5% year on year, compared with a 7.4% rise over 2023, market data specialist Nielsen said.

With Europe now planning to use tariffs to shut out grain from Russia, in further fallout from Moscow’s invasion of Ukraine, Turkish trade could become even more crucial.

“For durum, this could have major consequences, particularly for Italian imports,” Severine Omnes-Maisons, analyst at Strategie Grains, said of the proposed tariffs on Russia, which has supplied a fifth of EU durum imports so far in 2023/24.

Dwindling cultivation in the durum consumption heartlands of Europe and North Africa may also make the market more reliant on imported supply from Turkey.

Drought has gripped parts of the Maghreb and southern Europe in what analysts see as a sign that the zone is becoming too arid even for a crop that likes dry, warm conditions. Morocco’s cereal harvest is set to shrink by half this year.

In France, a regular supplier to EU neighbours, torrential rain could reduce this year’s durum area to a new 21st century low.

Importers have responded by scooping up crop from Turkey, Russia and Kazakhstan, a trio that Argus Media analyst Alexandre Marie sees as a potential “Canada on Europe’s doorstep”.

But some are cautious about Turkey’s long-term role given its state-managed grain supply and its own climate risks.

© Reuters. A person grates parmesan cheese over a plate of fettuccine with ragu at a restaurant in Rome, Italy, March 25, 2024. REUTERS/Remo Casilli

This season’s export campaign has been marked by uncertainty over how much exports the authorities will allow. State grain agency TMO this month cancelled an export tender.

“This season we were living day to day with Turkey. It remains a very political process,” one European durum trader said.

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