Crude futures gain as analysts see upside for prices

Front-month ICE Brent has gone up by $2.06/bbl on the day from Friday, to $96.93/bbl at 09.00 GMT.

PHOTO: Analysts at ING, Morgan Stanley and Goldman Sachs have upped their Brent crude forecasts for 2023. Getty Images

Upward pressure:   

Last week's OPEC+ decision cut output quotas by 2 million b/d from November has prompted several investment banks to revise their Brent price forecasts upward.

Dutch financier ING says that if OPEC+ producers are compliant with the cuts, they will completely change the oil supply-demand balance for the rest of the year and into next year. ING now expects a "large deficit" next year and will revise its price forecast of $97/bbl up.

Morgan Stanley thinks the OPEC+ supply cut and the EU's impending embargo on Russian oil will contribute to keep global supply tight going forward. It has also raised its oil price forecast for the first quarter of 2023 by $5/bbl to $100/bbl.

Goldman Sachs has raised its 2022 Brent price forecast by $5/bbl to $104/bbl, and thinks Brent will average a higher $110/bbl next year. According to the bank, the OPEC+ move is “very bullish” for oil prices.

Downward pressure:

Services sector activity in China and India – the world’s second and third largest oil consumers – contracted in September.

For the first time since June, China's Caixin service purchasing managers' index (PMI) has slipped below 50. It fell from 55 in August to 49.3 in September, amid renewed Covid-19 restrictions that disrupted supply and demand.

Due to a decline in demand and high inflation, India's service sector's activity slumped to a six-month low in September, according to the S&P Global India Services Purchasing Managers' Index (PMI), which dropped from 57.2 to 54.3.

SPI Asset Management managing director Stephen Innes has said that oil is being hit by a "triple whammy" of China's economic weakness, US monetary policy tightening and President Joe Biden's stimulus plan, Reuters reports.

By Konica Bhatt

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