Goldman Sachs Group gave an optimistic forecasts for oil prices after the middle of this year, citing never-anticipated-before numbers.
The group expected oil prices to rise sooner and higher than expected, at $75 a barrel in the third quarter this year.
The group said global energy demand will exceed supply from the OPEC+ alliance, shale oil companies and Iran.
Goldman Sachs forecast for Oil Prices
Goldman Sachs said global oil consumption will return to before COVID-19 levels by late July.
Production from the major producing countries is likely to remain very inelastic with higher prices.
Goldman Sachs raised its forecast for Brent crude by $10 to $70 a barrel during the second quarter of 2021. The group said prices to rise to $75 in the following three months (the third quarter).
“This faster re-balancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as the ramp-up in OPEC+ production lags our above-consensus demand recovery forecast,” bank analysts including Damien Courvalin said.
Recent price recovery was driven by unilateral Saudi production cuts along with improved demand outlook.
The rally has also been supported by investors using crude to position for a reflationary environment, Goldman said.
Brent oil traded above $63 a barrel on Monday and is up around 22% this year.
The bank said supply will keep lagging behind demand for several reasons:
- OPEC+ will fall behind the market rebalancing, especially as the pace of global drawdowns of stockpiles has accelerated.
- There are no signs of more activity from most non-OPEC+ producers outside of North America, creating a risk supply will fall 900,000 barrels a day short of the bank’s estimates in the coming year.
- The U.S. earnings season confirms that big explorers and producers, the key drivers of U.S. shale output, remain focused on returning cash to shareholders.
- Indications from the U.S. government suggest Iranian output likely won’t increase in the short term.