Goldman sees potential SPR release cutting H2 2022 Brent forecast by $15/b

A potential major release of strategic petroleum reserve over the coming months would lower Goldman Sachs' Brent crude price forecast by $15/b for the second half of 2022 but could support higher oil prices in 2023, the investment bank said March 31.

Crude prices fell sharply late March 30 on reports that the US was drawing up plans for a major release of up to 180 million barrels, almost a third of its strategic petroleum stocks, over several months to curb rising pump prices as Russia's invasion of Ukraine hits global oil supplies. Speculation of a new coordinated stock release with the International Energy Agency also gained ground after Australia's energy ministry said March 31 that the IEA has called an emergency ministerial meeting April 1 to discuss the state of the oil market. The IEA has not confirmed the meeting.

ICE Brent crude futures were trading down 4.6% on the day at $106.08/b in early European trading March 31.

Goldman said a release of that size would help the oil market rebalance in 2022, increasing supply by 1 million b/d for six months -- lowering its H2 2022 Brent forecast by $15/b to $120/b -- but would "not resolve the structural supply deficit, [that has taken] years in the making."

"In fact, lower prices in 2022 would support oil demand while slowing the acceleration in shale production, leaving for now a deficit in 2023, as well as the likely requirement to refill the SPR," Goldman said.

As a result, Goldman said the US move could raise its 2023 Brent oil prices $5/b above its current $110/b forecast for the year, reflecting higher demand and lower shale supply exiting 2022.

Policy briefing

The IEA, which was formed in the wake of the 1974 oil price shock, has already announced the largest emergency oil stock release in its history in a bid to help supply the market hit by disruptions from the Ukraine conflict. IEA members committed to releasing almost 62 million barrels of strategic oil stocks on March 1 to calm crude prices.

A White House briefing on its efforts to lower gasoline prices is scheduled for later March 31 at 17:30 GMT, Goldman noted, adding that additional measures could be announced, including a potential increase to the amount of ethanol blended into gasoline.

S&P Global Commodities Insights currently estimates that Dated Brent will average $120/b in the second quarter of 2022, before easing to $100/b by the end of the year.