OPEC+ supply increase causes Wall Street to downgrade oil price forecasts again

Wall Street analysts are lowering oil price forecasts and warning of a market glut resulting from increased OPEC+ supplies.

On Monday, May 5, Brent crude oil prices fell by 2.7% to $59.63 per barrel after the OPEC+ cartel announced an additional supply of 411,000 barrels per day (bpd) in June. Saudi Arabia also warned that it could increase supplies further.

Goldman Sachs Group Inc. lowered its Brent price forecasts for this year and next by $2-3 per barrel. The firm suggested that the OPEC+ decision could be a strategic move to curb US shale oil production.

Morgan Stanley lowered its quarterly estimates for this year by $5, which now stand at $62.50 per barrel for the third and fourth quarters. Following the latest OPEC+ agreement, the projected surplus is expected to increase by 400,000 bpd to reach 1.1 million bpd in the second half of the year.

Warren Patterson of ING noted that a more aggressive increase in OPEC+ output would lead to an oil surplus, leaving the market oversupplied through 2025.