U.S. crude prices could top $90 per barrel this autumn and hit $95 by the end of the year, if OPEC keeps oil production capped at current levels, Goldman Sachs said in a report issued on Monday.
U.S. oil prices have risen above $74 per barrel Monday, driven this month by higher demand and lower supplies, the report said, pointing out that such fundamentals could tighten further unless key OPEC members hike output.
"We believe an increase in Saudi Arabian, Kuwaiti and UAE (United Arab Emirate) production by the end of the summer is critical, to avoid prices spiking above $90 a barrel this autumn," the report stated.
OPEC agreed last year to lower output by 1.7 million barrels per day (bpd), and Goldman said global oil production is down about 1 million bpd from last summer's levels.
Disappointing output growth from non-OPEC producers also helped tighten supplies, Goldman said, adding global demand was up by 1 million bpd from year-ago levels.
"Our estimates show that keeping OPEC production at current levels, and assuming normal weather this coming winter, total petroleum inventories would fall by over 150 million barrels or 6.5% by the end of the year, which would push prices to $95 a barrel without a demand response," the report forecast.
A decision by OPEC to open the taps could take $5 to $10 off the price of a barrel of crude, as some speculators exit the market, although the fall might be brief.
"Such a pullback would likely prove temporary, as long as global economic growth remains strong, and the consequent reduction in oil spare capacity would increase the market vulnerability to unexpected oil supply disruptions," Goldman said.