Goldman Raises Q3 Oil Price Forecast to $75bpd

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By Emmanuel Addeh in Abuja with agency report

Goldman Sachs Commodities Research has raised by $10 its Brent crude oil price forecasts for the second and third quarters of 2021, citing 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 in the second quarter from the $60 it predicted previously and to $75 in the third quarter from $65 earlier.

“We believe this faster rebalancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as demand rebounds faster than supply, setting the stage for a tight physical market,” Goldman said in a note.

Reuters quoted the bank as saying that it now expects global oil demand to reach 100 million barrels per day (bpd) by late July 2021 versus its previous expectation of August 2021.
Oil prices rose on Monday as the slow return of U.S. crude output that was cut by frigid conditions raised concerns about supply just as demand rebounds.

Goldman expects the freeze in Texas to lead to a 1.5 million bpd global deficit this month and cut output by 0.2 million bpd in March due to infrastructure damage and missed completions.

An agreement to hike production by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies in the upcoming March meeting will not be bearish for prices as supply is set to lag, Goldman said.

It expects a 0.5 million bpd increase in quotas in April, with Saudi Arabia reversing its unilateral 1 million bpd cut, and continues to expect moderate exports from Iran this year.

“The key uncertainty for now is at which price level producers finally ramp-up activity… we are raising our marginal cost assumption by $5 per barrel to $60 per barrel Brent for the remainder of 2021,” it added.

Meanwhile oil prices rose yesterday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up 51 cents, or 0.8 per cent, at $63.42 a barrel by 0945 GMT, after gaining nearly 1 per cent last week. U.S. oil rose 45 cents, or 0.8 per cent, to $59.69 a barrel, having fallen 0.4 per cent last week.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Oilfield crews will probably take several days to de-ice valves, restart systems and begin oil and gas output. U.S. Gulf Coast refiners are assessing damage and may take up to three weeks to restore most of their operations, analysts said, though hampered by low water pressure, gas and power losses.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.