Markets underestimating oil demand; see Brent at $80: Goldman Sachs
International travel, according to Goldman Sachs is another key factor that is likely to trigger a demand rise, which in turn will keep oil prices elevated.

Global markets are currently underestimating the demand for oil as more economies open up for business, says a recent report by Goldman Sachs that expects Brent to hit $80 per barrel going ahead. Recently, S&P Global Platts, too, had forecast oil prices hitting and staying above $70 a barrel by mid-2021, driven by a more broad-based pickup in economic activity amid widening vaccination rollouts.

Mobility, according to Goldman Sachs too, is rapidly increasing in the US and Europe, as vaccinations accelerate and lockdowns are lifted, with freight and industrial activity also surging. This developed market (DM) recovery, Goldman Sachs said, is in fact larger than estimates, and is helping offset the recent hit to demand and the likely slower recovery in South Asia and Latin America.

“Despite the global market deficit coming in line with our forecasts in recent months, we under-estimated the weight of such demand and Iran uncertainties, keeping prices trading below our $75 a barrel in the second quarter of 2021 (Q2-21) fair value. With growing evidence of the demand rebound, and imminent clarification on the likelihood of an Iranian return, we now see a clearer path for the next leg higher in oil prices, with the sell-off offering opportunities to position for the rally to $80 a barrel” wrote Jeffrey Currie, global head of commodities research at Goldman Sachs in a recent co-authored note.

Over the past one year, Brent crude oil prices have climbed nearly 85 per cent to $66 a barrel now, as the global economy opened for trade after a stringent lockdown triggered by the Covid-19 pandemic.

Since March, the prices have been volatile on account of concerns over the pace and efficacy of vaccination, fresh Covid waves across emerging markets (EMs) and the return of Iranian barrels, with the latter pushing Brent prices down from $70 to $65 a barrel last week.

Topics
Oil Prices | Crude Oil Price | Brent oil