Brent crude oil price forecast according to Wall Street analysts

Brent crude oil price has been one of the top-performing commodities this week. It jumped to a high of $85.90, the highest point since March 7 of this year. In all, oil prices have jumped by more than 19% from the lowest point in March. WTI crude oil has also jumped to $80.

Wall Street reacts to OPEC cuts

The biggest crude oil news of the week was that the OPEC+ cartel decided to dramatically slash oil production by over 1.7 million barrels. In a statement, the cartel said that key countries like Saudi Arabia and Russia would cut about 500k barrels per day each. Other countries that will slash oil production are Kuwait, Iraq, and the United Arab Emirates.

In my view, I believe that these cuts are a sign that the global oil demand is not as high as was widely expected earlier this year. For example, it has been widely reported that Nigeria is struggling to find buyers for its oil cargo. Also, China’s demand is not picking as fast as was widely expected earlier this year.

Analysts have weighed on what to expect in the coming months. In a statement, analysts at Goldman Sachs decided to boost their oil price target back to $100. As you recall, Goldman Sachs recently downgraded its oil price forecast to $94. In a statement upgrading its outlook, the bank said:

“The risks around cutting production have become asymmetric given how short positioning has become, and because price increases in response to tightening events can be stronger when the market is short.”

Citigroup, on the other hand, believes that oil prices will not reach $100 any time soon. In an interview with Bloomberg, Ed Morse warned that more supplies need to be removed from the market for oil to move to $100. He said:

“There is a scenario for $100 a barrel oil. But I don’t think we’re anywhere near that yet.”

Analysts at Bank of America said that a supply cut will have an impact on Brent crude oil prices. If OPEC goes on with the plan, they see an impact of between $20 and $25 per barrel. However, the report warned that OPEC+ has consistently failed to meet its supply targets. As such, they expect oil to reach $90 per barrel. The statement said:

“OPEC is no longer afraid of a major US shale oil supply response if Brent crude oil prices trade above $80 per barrel, so cutting volumes to push oil prices higher does not carry the same risks it did five years ago.

In another report, analysts at RBC Capital Markets warned that the headline supply cut was too high and that the real figure will be about 700k barrels per day. The statement said:

“The surprise cut by OPEC+ could result in an actual reduction of about 700,000 barrels a day in output despite the headline figure being around 1.65 million barrels a day.”

Brent crude oil price prediction

The daily chart shows that oil prices made a bullish gap this week after the OPEC supply cuts. It jumped to a high of $85.89, which was ~20% above the year-to-date low. The price is being supported by the 50-day and 100-day exponential moving averages. 

It is also at a strong resistance point where it has struggled moving above earlier this year. I suspect that prices will attempt to fill the gap and retest the support at $80 before making a comeback.