Goldman Sachs cuts oil price forecast by almost 10 per cent

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London — Goldman Sachs has slashed its forecast for oil prices by nearly 10%, citing weak demand in China and a glut of supply from sanctioned countries, including Russia.

The Wall Street bank now thinks Brent crude, the global oil benchmark, will cost US$86 a barrel in December, compared with its previous estimate of $95, while West Texas Intermediate (WTI) crude will fetch $81 a barrel, down from $89.

That's despite Saudi Arabia's recent decision to slash its own output, and a pledge by other members of the OPEC+ alliance of leading oil producers to extend a policy of supply restraint into next year.

Extra supply of around 800,000 barrels a day, mostly from sanctioned countries Russia, Iran and Venezuela, is behind the "bulk of the softening" in its price forecasts, the bank's commodities analysts said in a research note Sunday.

"Russian supply has nearly fully recovered despite the decision by many companies to stop buying Russian barrels, and [effectively] a ban of Western financial and logistical services," the bank wrote. Western firms can work with Russian producers only if they respect the price caps imposed on the country's oil by Group of Seven countries.

Since late May, prices for Brent and WTI have fallen 6.8% and 7.6% to $73 and $69 a barrel respectively as disappointing economic data from China has dampened the global demand outlook.

In a separate note, also published Sunday, Goldman Sachs said weakness in China's property market would put a "multi-year growth drag" on the world's second-largest economy.

There appears to be "no quick fix" for the country's struggling real estate sector, which has seen declining property values and a number of defaults by private developers since late 2021.

Oil prices have been falling despite Saudi Arabia — the world's biggest crude exporter — saying it plans to reduce production by 1 million barrels per day next month to buoy prices as it anticipates a slowdown in global demand.