Goldman sees modest downside risk to oil prices from steady Russian production

Goldman Sachs on Wednesday said that the current resilience in Russian oil production, if sustained, places only moderate downside risk of about $9 per barrel on its “bullish” 2023 average Brent forecast of $97.5 per barrel.

The Wall Street investment bank expects Russian oil production to drop by 0.6 million barrels per day by April due to a lack of tankers to fully redirect oil following the upcoming European embargo.

The European Union has agreed a full ban of Russian oil products imports from February 2023 in an attempt to cut Russia’s revenues for its role in the military conflict with Ukraine.

“However, any retaliation via voluntary production cuts also implies some upside oil price risk,” Goldman Sachs analysts said in a note.

Brent futures were trading around $87 a barrel on Wednesday, while US crude was around $82 per barrel.

Russia has ramped up diesel supplies to Turkey and Morocco, seeking to reroute its oil products ahead of an EU embargo, data from traders and Refinitiv showed.

Oil prices rose about 1 percent on Wednesday to their highest since early December on a drop in the US dollar and optimism that the lifting of China’s strict COVID-19 curbs will lead to a fuel demand recovery in the world’s top oil importer.