Goldman Sachs, a US investment bank and financial services company, has projected that oil prices will rebound to $75 by the third quarter of 2021.
Goldman said on Monday that the revised forecast is due to a recovery in global energy demand which has outpaced the supply response from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+).
The bank said consumption will get back to pre-virus levels by late July, however, output from major producers is likely to remain unchanged.
It said the reason for the forecast is due to lower expected inventories, higher marginal costs to restart upstream activity and speculative inflows.
The Wall Street bank expects Brent prices to reach $70 per barrel (bbl) in second quarter of 2021 from the $60 previously projected.
“We now believe that oil prices will rally sooner and higher than our previous $65/bbl summer forecast because of fundamentals, higher marginal costs — as least in the short run — as well as the ongoing reflationary asset rotation,” it said.
“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.”
Goldman now expects global oil demand to reach 100 million barrels per day (bpd) by late July 2021 versus its previous August 2021 projection.
The bank also said supply will keep lagging behind demand for several reasons.
It explained that: “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. Indications from the US government suggest Iranian output likely won’t increase in the short term”.
Brent crude is the market benchmark for crude oil and it traded at $63.43/bbl as at 14:02 GMT on Monday.