Goldman Sachs Oil Price Forecast for 2022 - Nov 25

Goldman Sachs Oil Price Forecast for 2022 - Nov 25

Postby dan_s » Thu Nov 25, 2021 10:01 am

Note from Goldman Sachs Equity Research Team dated 11-16-2021
"No near-term solutions exist to solve the supply chain and input cost problems that plague so many industries. However, managements have used price increases, cost controls, and technology to preserve margins, and many of the headwinds will ease in 2022. However, a tight labor market will persist and drive wage inflation. Our commodities research colleagues forecast Brent crude oil will peak at $90/bbl in early 2022 and then decline to $80 by year-end. Our economists expect annualized US GDP growth will decelerate from 4.5% in 1Q to 1.8% in 4Q 2022. During the same time, core PCE inflation will subside from 4.3% in 1Q to 2.4% by year-end."

MY TAKE: Today the average PE ratio of the S&P 500 is over 21. I believe our Sweet 16 will do well in 2022 because (a) based on my 2022 forecasts, the PE ratio for the Sweet 16 is less than 6 and all 16 are under 10 as of today's share prices and (b) if GS's oil price forecast is correct, investors will gain more confidence in the free cash flow (FCF) generation ability of the Sweet 16. They have all been FCF positive this year and FCF will be much higher in 2022 as more and more Bad Hedges expire. I expect natural gas and NGL prices to stay elevated no matter what oil prices do. Our "gassers" are going to report stunning Q1 2022 results if natural gas averages $5/MMBtu.
Dan Steffens
Energy Prospectus Group
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