Oil will rise back above $100 a barrel this year and may face a serious supply problem in 2024 as spare production capacity runs out, according to Goldman Sachs Group Inc. 

With sanctions likely to cause Russian oil exports to drop and Chinese demand expected to recover as the country ends its Covid Zero policy, prices will rise above $100 from their current level of around $80, according to Goldman.

A lack of spending in the industry on production needed to meet demand will also be a driver of higher prices, and this lack of capacity may become a big issue by 2024, analyst Jeff Currie said on the sidelines of a conference in Riyadh, Saudi Arabia, on Sunday.

“The commodity super cycle is a sequence of price spikes with each high higher and each low higher,” said Currie, who heads commodities research at Goldman. By May, oil markets should flip to a deficit of supply compared to demand, he said. That could use up much of the unused capacity global producers have, which will be positive for prices, he said.

Oil prices have had a volatile few years, plunging below $20 during the coronavirus pandemic before soaring close to $130 after Russia’s invasion of Ukraine disrupted supply that was already falling short of global demand. The cost of transport fuels rose even higher as refineries maxed out capacity, before falling back as countries scrambled for alternatives.

Saudi energy minister Prince Abdulaziz bin Salman also used remarks at the Riyadh conference on Saturday to decry the lack of investment in refining capacity that has left the world undersupplied. He reiterated that OPEC+ would remain cautious in deciding when to ramp up output.

Saudi Arabia is the de facto leader, along with Russia, of the group that brings together Organization of Petroleum Exporting Countries and other producers in an effort to balance supply and demand while keeping prices palatable for members. Prince Abdulaziz said OPEC+’s efforts at limiting supply had saved oil markets during the plunge in demand during the pandemic.

Currie reiterated Goldman’s view that OPEC+ will unwind production limits and look to raise output later this year. An OPEC+ market monitoring committee this month recommended that the group keep oil output unchanged. 

“Right now, we’re still balanced to a surplus because China has still yet to fully rebound,” Currie said. Capacity is likely to become a problem later this year when demand outstrips supply, he said.

“Are we going to run out of spare production capacity? Potentially by 2024 you start to have a serious problem.”