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Goldman Sachs has cut its forecast for the average oil price next year by 12%, citing abundant production in the United States.

The Wall Street bank wrote in a note Sunday that it now expects Brent, the global oil benchmark, to average $81 a barrel in 2024, down from its previous estimate of $92 a barrel. It forecasts Brent to peak at $85 a barrel next June.

The bank’s analysts said “the key reason” for the revised price expectations was “ongoing gains in drilling speed and well completion intensity” in the United States.

Brent and West Texas Intermediate crude, the US benchmark, were both up 3.5% to trade at $79 and $74 a barrel respectively by 9.58 am ET Monday.

The upswing came after oil giant BP said it would pause all shipments through the Red Sea because of increased attacks on vessels by Hamas-supporting Houthi militants in Yemen.

Both oil contracts are still down from the 13-month highs of $95 and $94 respectively hit in September. Prices have fallen despite the Organization of the Petroleum Exporting Countries and its allies — a group of the world’s major oil producers known as OPEC+ — saying they will extend a supply cut of 2.2 million barrels per day through the first quarter of next year in an effort to buoy prices.

Record levels of oil production in the United States have helped drive those price declines. The US Energy Information Administration expects crude oil output to have reached an all-time high of 12.9 million barrels a day on average this year, and to hit another record average of 13.1 million barrels a day in 2024.

Markets are also fretting over a likely drop in demand for crude, especially in China, where there are persistent signs of a weakening economy.

Still, Goldman Sachs said, the supply cuts by OPEC+, a potential economic rebound in China, as well as a “modest” risk of a US recession, among other factors, are likely to limit the extent of falls in oil prices.

Craig Erlam, senior market analyst at Oanda, wrote in a note Monday that optimism among investors that the world’s major central banks might soon start cutting interest rates “has boosted the odds of a softer landing, which could support demand (for oil).”

A “soft landing” describes a successful campaign by a central bank to lower inflation through interest rate hikes without tipping the economy into recession.

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