The news of the upcoming production cuts has prompted rating agencies and investment banks to revise their forecasts. Goldman Sachs, for example, has raised its price forecast for Brent for December 2023 by as much as $5, to $95 a barrel. The bank estimates that the output reduction can provide a 7% boost to oil prices
OPEC says its decision is “a precautionary measure aimed at supporting the stability of the oil market.”
And the cartel has good grounds for concern, as the recent banking turmoil in Europe and the US could trigger a broader financial crisis, which will send oil demand plummeting. OPEC’s decision could have also been driven by the growing level of OECD commercial oil stocks, which stood at 2.802 billion barrels this January, up 34.9 million barrels from a month earlier.
The market is now waiting for the reaction from Western countries. There is a possibility that NOPEC, the anti-OPEC bill, will be revived and passed into law. In return, OPEC nations could abandon the petrodollar altogether. Note that alternative currencies have lately been gaining traction in global trade, with CNOOC and TotalEnergies completing the first LNG deal in yuan,
while contracts for Russia’s crude supplies to India are now settled in non-dollar currencies.