Goldman Sachs has raised its oil price forecast for this year and 2023, as the U.S. bank expects the 2 million bbl/d output cut agreed by OPEC+ producers to be “very bullish” for prices going forward.

OPEC+, which groups members of OPEC and allies including Russia, agreed its deepest cuts to production since the 2020 COVID pandemic at a meeting in Vienna on Oct. 5.

If the latest reduction in output by OPEC+ is sustained through December 2023, it would amount to $25/bbl upside to their Brent forecast, with potential for price spikes even higher should inventories fully deplete, Goldman Sachs said in a note dated Oct. 5.

Goldman Sachs raised its 2022 Brent price forecast to $104/bbl from $99/bbl and 2023 forecast to $110/bbl from $108/bbl.

The U.S. bank also raised its fourth quarter 2022 and first-quarter 2023 Brent price forecast by $10/bbl to $110/bbl and $115/bbl, respectively.

Benchmark Brent crude was trading around $94/bbl on Oct. 6, after gaining 1.7% in the previous session.

Such a large OPEC+ effective cut will likely warrant another response from the U.S. administration, and even a coordinated International Energy Agency SPR release, the bank noted.

“The oil market’s buffers [stocks and spare capacity] remain critically low, and higher prices remain the key viable, long-term solution to increased inventories in the short term and higher supply capacity medium term,” Goldman added.

Morgan Stanley on Oct. 5 also raised its oil price forecast for the first quarter of 2023, predicting tight supply going forward.

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