Goldman Sachs energy analysts in a Wednesday note predicted OPEC and its allies will increase the group's production level for July, and they recommended clients with shorter-term portfolios use oil put options as a hedge against growing recession and oversupply risks.

The investment bank said that it expects the eight OPEC+ members to announce another production increase of 411,000 b/d for July, citing lower oil output by Kazakhstan and Iraq as well as overall compliance by other members.

In addition, Goldman said global demand remained resilient, with domestic oil demand in Saudi Arabia up 100,000 b/d year to year in April ahead of the summer cooling demand spike in the Kingdom.

OPEC+ is scheduled to meet on Saturday to discuss its July oil production levels. At its last policy meeting, the oil cartel also increased production by 411,000 b/d for June.

The U.S. bank forecasts OPEC+ will keep production flat after the final round of July production hike. Goldman cited a combination of new projects entering the market later this year, slower third-quarter global economic growth due to tariffs and an increase in the pace of builds in oil stocks.

In a separate Wednesday note, Goldman also recommended lower-than-usual allocation to oil in long-term portfolios defined as those with an investment horizon of at least five years.

The bank attributed its recommendation to the hard-to-predict nature of possible extreme energy disruption shocks and oil-led inflation risks due to an expected sharp slowdown of non-OPEC supply growth starting in 2028.

For tactical portfolios of less than two years, Goldman recommended buying oil puts or put spreads to hedge against elevated U.S. recession risks in 2025 and to benefit from rapid oil supply growth outside of U.S. shale production.

Buying an oil put option is a bearish play because the put buyer benefits when the price of the oil decreases.

At the same time, Goldman also recommends a higher-than-usual allocation to gold, which is used by some investors as a hedge against inflation and as safe havens during financial turmoil.

The bank continued to predict an average Brent crude price of $60/bbl for the rest of 2025 and an average West Texas Intermediate price at $56/bbl. It also projected Brent crude will average $56/bbl and WTI will average $52/bbl in 2026.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

--Reporting by Frank Tang, ftang@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com

(END) Dow Jones Newswires

May 30, 2025 13:23 ET (17:23 GMT)

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