Oil trades near two-week high; Goldman Sachs pegs Brent crude to average around $80/bbl in 2024

International crude oil prices rose on Tuesday, November 26, as traders eyed December output hikes and anticipated the potential impact of US President-elect Donald Trump's planned trade tariffs on Mexico and Canada. Also, investment banking major Goldman Sachs eyes Brent prices to average around $80 per barrel in 2024 despite a deficit and geopolitical uncertainty.

Brent crude futures were last up 42 cents, or 0.58 per cent, at $73.43 a barrel. US West Texas Intermediate crude futures were at $69.39 a barrel, up 45 cents, or 0.65 per cent. Both benchmarks briefly jumped more than $1 per barrel during the session. Back home, crude oil futures last traded 0.28 per cent higher at ₹5,792 per barrel on the multi-commodity exchange (MCX).

Crude oil trades higher on geopolitical tensions

-According to news agency Reuters, the producer group Organisation of Petroleum Exporting Countries and its allies (OPEC+) are discussing a further delay to a planned oil output hike that would start in January ahead of Sunday's policy meeting to decide policy for the early months of 2025. OPEC+ pumps about half the world's crude oil.

-OPEC+ had planned to slowly roll back oil production cuts with small increases over many months in 2024 and 2025. However, a slowdown in Chinese and global demand and rising output outside the group have damaged that plan. OPEC+ members Iraq, Saudi Arabia and Russia agreed in a meeting on the importance of maintaining stable oil markets and fair prices.

-US President-elect Donald Trump said he would impose a 25 per cent tariff on all products coming into the US from Mexico and Canada. Most of Canada's four million bpd of crude exports go to the US. Analysts have said it would be unlikely that Trump would impose tariffs on Canadian oil, which cannot be easily replaced since it differs from the grades that the US produces.

-Analysts said the market's reaction to the ceasefire news on Monday was overdone, as the broader Middle East conflict has yet to significantly disrupt supplies this year. Despite the possibility of the imminent diplomatic breakthrough, hostilities raged as Israel dramatically ramped up its campaign of air strikes in Beirut and other parts of Lebanon on Tuesday.

-According to the top US oil and gas lobbying group, the American Petroleum Institute, maintaining the flow of crude oil and energy products across the US, Mexico, and Canada borders is critical. Monday's tariff announcement does not seem to immediately impact Canadian oil markets.

Goldman Sachs expects oil to average around $80/bbl in 2024

"Our base case is that Brent stays in a $70-85 range, with high spare capacity limiting price upside, and the price elasticity of OPEC and shale supply limiting price downside. However, the risks of breaking out are growing," Goldman Sachs said.

-The bank sees upside risks to Brent prices in the short term, with prices potentially rising to the mid-$80s in the first half of 2025 if Iranian supply drops by one million barrels per day (mb/d) on tighter sanctions. Given the high spare capacity, Goldman said that the medium-term price risks skew to the downside.

-“While there is ample spare capacity in oil production, we expect refining to remain quite tight and gasoline and diesel margins to recover further.” The investment bank still sees Brent averaging $76 per barrel in 2025 but edged down its 2026 forecast to $71 per barrel on a 0.9 mb/d surplus.

-Goldman expects oil demand to continue growing for another decade, driven by rising total energy demand alongside GDP growth and the ongoing challenges of decarbonizing air travel and petrochemical products.