What led Goldman Sachs raise its crude price forecast?

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What led Goldman Sachs raise its crude price forecast?

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 What led Goldman Sachs raise its crude price forecast?

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Summary

  • The global investment firm has predicted that Brent crude prices to go up to nearly US $80 per barrel this year.
  • It has cut its OPEC+ production forecast by 0.9 million bpd for the next six months.

The oil markets seem to have bounced back from a year of pandemic-led crisis. Further upgrading its price target for crude oil in 2021, Goldman Sachs has lifted its Brent crude price forecast to US $75 for the second quarter this year and has increased it further to US $80 for the remaining two quarters of the year. This is a result of the supply cut decisions by the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) oil industry association.

Also Read: Oil soars on OPEC+ decision, supply quotas unchanged for April

On Thursday, the oil cartel decided to keep output target unchanged for April despite rising demand. The resultant price rise could in fact push the allying nations to change their minds yet again when they meet next on 1 April, say commodity analysts.

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Also Read: Why oil prices have spiked to pre-pandemic highs of more than US $60

 

The morning deals next day on 5 March saw Brent crude prices up at US $67.85 for a barrel, up by 1.6 per cent from the previous day’s close. Similarly, the US West Texas Intermediate (WTI) crude futures went up by 1.2 per cent to US $64.60 per barrel in the morning hours. In fact, both the futures contracts had surged by 4 per cent by the end of the day on Thursday after the OPEC extended production cuts.

Further, Saudi Arabia has decided to extend its decision to cut volumes by 1 million barrels per day (bpd) for yet another month, surprising the investors.

The prediction for the 2022 sees the Brent crude prices go back again slightly to US $75 as the supplies would rise and demand pressure decelerates, said the leading investment bank.

 

Also Read: Crude Oil at One Year High; Stocks Under Radar - BP Spon & Exxon Mobil Corp.

 

Goldman has cut its OPEC+ production forecast by 0.9 million bpd for the next six months. It added that the supplies from Iran, shale and non-OPEC regions are also likely to remain inelastic for the second half of this year. This will allow the oil producers to rebalance the oil markets sooner than earlier expected, it said.

Goldman said that the OPEC’s tight oil market strategy was successful due to its sudden and unexpected nature. Other factors driving the recovery have been a drop in stockpiles, US producers restraining supply and a good recovery in Asia’s demand for crude.

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