Goldman Adjusts Crude Forecast Down on Covid-19 Surge


Emmanuel Addeh in Abuja with agency report

Goldman Sachs has reduced its forecast for Brent crude in the third quarter of 2021 by $5, to $75 per barrel, following the drop in oil prices on the back of a shocking surge in the Delta variant around the globe.

Oil prices had fallen by $5 per barrel on a day alone last week on a surge in the prevalence of new Delta variant coronavirus cases at a time when OPEC+ agreed to ramp up production by 400,000 bpd starting in August and another 400,000 bpd in every month thereafter until the production cut is entirely wound down.

The fear is that a resurgence of coronavirus cases could trigger more restrictive measures and slow economic recovery, and hence oil demand.

“Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ (comprising the Organisation of the Petroleum Exporting Countries (OPEC) Russia and other producers) slower production ramp-up, ”Goldman said.

Now, Goldman is projecting a Q3 deficit of 1,5 million bpd, compared to the 1.9 million bpd estimate that it had previously forecast.

For the fourth quarter, Goldman predicted $80 per barrel Brent, compared to its earlier forecast of $75 per barrel, with a 1.7 million bpd deficit in Q4 this year.

Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains,” Goldman said.

Reuters reported that the U.S. investment bank said that the OPEC+ deal to boost oil supply supports its view on oil prices and expects modest “upside” to its summer forecast for Brent to reach $80 a barrel.

OPEC+ agreed recently to boost oil supply from August to cool prices, which have climbed to a two and half-year highs.

“The agreement had two distinct points of focus: a moderate increase in production which will keep the market in deficit in the coming months, as well as guidance for higher capacity which will be needed in coming years given growing under-investment,” Goldman Sachs said in a note.


Goldman said the deal is in line with its view that, “OPEC should focus on maintaining a tight physical market all the while guiding for higher future capacity and disincentivising competing investments.”

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The OPEC+ deal represents $2 per barrel “upside” to its $80 per barrel summer Brent price forecast and a $5 upside to its $75 per barrel forecast for next year, “Goldman explained.