By Giulia Petroni

Major Wall Street banks lifted their oil-price forecast for the year amid growing uncertainties over the impact of U.S. trade and energy policy, but broader concerns over demand trends and a supply surplus keep views below $80 a barrel.

A survey compiled by The Wall Street Journal--which includes Goldman Sachs, JPMorgan and Morgan Stanley--showed Brent crude is expected to average $73.01 a barrel this year, while West Texas Intermediate is projected at $68.96 a barrel. In a December survey, the benchmarks were seen at $71.57 and $67.44 a barrel, respectively.

"The return of Trump to the White House has put the spotlight on his energy policies," ANZ commodity strategists Daniel Hynes and Soni Kumari said. "He has already declared a national energy emergency with the aim of increasing oil supply and bringing prices down. However, most of his policies could ultimately tighten the oil market."

President Trump's executive orders and remarks have been the main drivers of oil price action over the past two weeks and are likely to continue fostering uncertainty for quite some time.

Plans to impose a 25% tariff on imports from major trade partners Canada and Mexico as early as Saturday are increasingly worrying investors, even though it remains unclear whether the levies would include oil. The countries are key suppliers of crude and raising import taxes could have significant implications, potentially leading to higher gasoline prices in the Midwest, the largest consumer of Canadian crude in the U.S.

Meanwhile, potentially tighter sanctions on Russia and Iran or the discontinuation of Venezuelan oil imports could heighten geopolitical risks and disrupt global flows, increasing the risk premium to oil.

"We believe that U.S. policymakers want to avoid Brent sustainably above $85/bbl, which roughly corresponds to the emotionally salient $3.5 per gallon threshold for U.S. retail gasoline prices," Goldman Sachs said.

Yet, analysts at the U.S. bank said the price impact of lower supply due to sanctions would likely be limited in the long term, as the Organization of the Petroleum Exporting Countries and its allies could decide to raise production for longer to stabilize the market.

In the Journal survey, Brent and WTI are forecast at $75.33 and $71.22 a barrel in the first quarter, respectively. The benchmarks are then expected to slightly fall to $74.02 and $70 a barrel in the second quarter and to $73.10 and $68.91 a barrel in the third.

"U.S. policy risks reinforce our view that the risks to our $70-$85 Brent range forecast are skewed to the upside in the short term, but to the downside in the medium-term because of high spare capacity and because broad tariffs could hurt demand," Goldman analysts said in a report.

The U.S. bank raised its Brent forecast to $78 a barrel this year and $73 a barrel the next from previous expectations of $76 and $71 a barrel, respectively, reflecting lower inventories in OECD countries.

In evening trade on Friday, the international oil benchmark traded around $75 a barrel, while the U.S. oil gauge was at around $72 a barrel. Oil prices have come under pressure following a robust start of the year, with Brent crude retreating to the mid-70s after breaking above $80 a barrel in mid-January amid Trump's calls for higher OPEC output, fears over the impact of trade tariffs on global growth and a recent market selloff sparked by Chinese AI upstart DeepSeek.

Meanwhile, the U.S. Federal Reserve kept the policy rate unchanged at its last meeting, indicating it was in no rush to make any further rate cuts. Higher rates typically boost the U.S. dollar and make commodities like oil more expensive for holders of other currencies, dampening demand.

Oil traders now wait to see what OPEC+'s next move will be. The group of oil producing countries is expected to stick with its current supply policy, gradually raising output from April despite Trump's pressure to open the taps and bring down prices.

U.S. sanctions threats against Russia and Iran could potentially make room for more OPEC output, with the cartel's large spare capacity acting as a buffer in the event of supply disruptions, according to market watchers.

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

January 31, 2025 11:29 ET (16:29 GMT)

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