Goldman Sachs is now even more bullish on oil, expecting Brent Crude prices to hit $75 a barrel in the third quarter this year, on the back of faster market rebalancing, lower expected inventories, and traders hedging against inflation.
In a note on Sunday, cited by Forexlive, the investment bank’s analysts forecast Brent Crude prices reaching the $70 a barrel mark during the second quarter of this year, and hitting $75 in the third quarter. Goldman Sachs is thus lifting its previous Q2 and Q3 forecasts by $10 per barrel.
“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,” said Goldman Sachs.
“We further believe that this additional rally will be supported by the current repositioning for a reflationary environment with investors turning to oil, buying a lagging real asset that benefits from a stimulus-driven recovery and has demonstrated an unmatched ability to hedge against inflation shocks,” the analysts noted.
Goldman expects the lower inventories will lead to an oil price rally sooner and at higher price levels.
On Monday morning, Brent Crude prices were up by 2 percent at $64.18 at 9:54 a.m. ET, while WTI Crude again moved above the $60 per barrel mark, having risen 2.6 percent at $60.78.
Earlier this month, Goldman Sachs had another bullish message for oil markets, saying in a note that it expected global oil demand to recover to pre-pandemic levels of 100 million bpd by August this year.
According to Goldman, the oil market was in a deficit of 2.3 million bpd in the final quarter of 2020. With supply still tight at the start of 2021, the immediate future for prices is bright despite expectations for a slow demand recovery.