Oil traders overreacting to the wrong triggers?

Oil traders overreacting to the wrong triggers?

Divisions within OPEC have caused WTI crude to fall below $74 per barrel, ending a three-day climb for the commodity.

Angola, which joined OPEC in 2007, said it is leaving the Organization of the Petroleum Exporting Countries. This move raised concerns about OPEC's capacity to stabilize global prices, particularly amid disagreements over oil production quotas.

However, operational challenges in Angola have hampered the country's ability to reach its sanctioned daily output of 1.5 million barrels; so maybe its departure is not hugely damaging to OPEC’s control, and the market is overreacting to the wrong thing here.

Maybe, a more pressing issue could be the surging production in the United States. Recent data from the Energy Information Administration revealed a record-breaking daily output of 13.3 million barrels last week.

For one, Goldman Sachs has adjusted its forecast for the average oil price next year, reducing it by 12% due to ample production in the United States. In a note released last Sunday, Goldman revised its estimate, projecting an average of $81 per barrel in 2024, down from the previous estimate of $92 per barrel. Goldman Sachs anticipates it to reach its peak at $85 per barrel in June.

Meanwhile, Citigroup offers a more cautious outlook by forecasting an average 2024 oil price of $75. This stands as the lowest projection among the major U.S. banks