NEW YORK, Dec 2L In a recent report, the Asset & Wealth Management Investment Strategy Group (ISG) at Goldman Sachs forecasts that the price of a barrel of oil is likely to trade within the range of $70 to $100 for the majority of 2024. This prediction is based on several factors, including slowing oil demand growth attributed to tighter financial conditions and elevated odds of a US recession over the next year, with ISG assigning a 30% to 40% likelihood of a recession.

The outlook also considers robust non-OPEC production growth, particularly outside the US, and the expectation that OPEC will increase some of its reduced production. ISG emphasizes that their forecasts may differ from those of other groups within Goldman Sachs.

Despite the projected stability in the price range, ISG acknowledges the likelihood of short-term volatility. They note, "A stable price range does not preclude potential sharp price rallies and drawdowns, particularly given current macroeconomic uncertainties and heightened geopolitical risks."

OPEC's production policy and discipline are anticipated to play crucial roles in shaping the oil price trajectory in 2024. Saudi Arabia and Russia, two major OPEC+ producers, have committed to production cuts, surprising the market as they have followed through on prior cut announcements.

The ongoing negotiations among OPEC+ countries regarding their 2024 production quotas highlight the challenges in balancing the market and could contribute to additional price volatility.

The report also highlights external factors, such as the Israel-Hamas war, that could impact oil prices. If the conflict escalates, spot oil prices may experience sharp but transitory increases. Potential disruptions include tighter oil sanctions on Iran, Iran attempting to block the Strait of Hormuz, an Arab oil embargo, and other Arab producers reducing production. However, blocking the Strait of Hormuz is considered unlikely to succeed for an extended period.

The dynamics of the global oil market have evolved since the Arab oil embargo of the 1970s. The oil intensity of the global economy has significantly decreased, and the Middle East's share of global oil exports has declined. The report notes that major episodes of violence between Israel and Palestine since 2000 have had a neutral impact on oil prices overall, although temporary increases have occurred due to fears of disruption.