Oil Price Forecast from Goldman Sachs - Nov 30
Posted: Mon Nov 30, 2020 9:26 am
This week’s prize riddle in commodities will be figuring out when and where the freefall in gold ends.
The other issue will be determining how quickly oil will get to $50 a barrel—and whether it’ll stay there or reverse as markets dial back some of the overrun in risk sentiment over potential COVID-19 vaccines.
Case in point: Citigroup sees support for gold emerging at $1,700 an ounce—about $75 below where it is currently trading—while Goldman Sachs projects oil will hit $65 per barrel in 2021.
Goldman said in the short-term, the oil market faced spreading lockdowns with demand declining in Europe and the range of infections likely asymmetric to the upside through the winter. It added:
“We expect this winter wave to generate a 3 million barrels per day hit to global oil demand, only partially offset by heating, emerging markets and restocking demand, although this demand hit has so far been masked by strong Asian crude buying and restocking.”
“We expect these muddied short-term fundamental signals and the opposite pulls of lockdowns vs. vaccines to keep oil prices volatile in coming weeks. These cross-currents will further complicate OPEC+’ decision this week to delay or implement its scheduled 1.9 mb/d January production increase.”
A lack of an OPEC+ extension representing $5/bbl downside from current spot levels on our modeling further contributed to short-term price gyrations, it said.
“Ultimately, these winter headwinds are just speed bumps on the path to a tightening oil market, with the winter COVID wave delaying but not derailing the oil market rebalancing, with normalized OECD stocks, OPEC+ spare capacity returning to 1Q20 levels and finally needed shale production growth all occurring by 4Q21."
“This leads us to reiterate our recommendations to be long Dec. 21 Brent forwards, our preferred expression of oil’s 2021 rally, as well as for producers to wait to hedge.”
Read more: https://www.investing.com/analysis/comm ... -200546237
The other issue will be determining how quickly oil will get to $50 a barrel—and whether it’ll stay there or reverse as markets dial back some of the overrun in risk sentiment over potential COVID-19 vaccines.
Case in point: Citigroup sees support for gold emerging at $1,700 an ounce—about $75 below where it is currently trading—while Goldman Sachs projects oil will hit $65 per barrel in 2021.
Goldman said in the short-term, the oil market faced spreading lockdowns with demand declining in Europe and the range of infections likely asymmetric to the upside through the winter. It added:
“We expect this winter wave to generate a 3 million barrels per day hit to global oil demand, only partially offset by heating, emerging markets and restocking demand, although this demand hit has so far been masked by strong Asian crude buying and restocking.”
“We expect these muddied short-term fundamental signals and the opposite pulls of lockdowns vs. vaccines to keep oil prices volatile in coming weeks. These cross-currents will further complicate OPEC+’ decision this week to delay or implement its scheduled 1.9 mb/d January production increase.”
A lack of an OPEC+ extension representing $5/bbl downside from current spot levels on our modeling further contributed to short-term price gyrations, it said.
“Ultimately, these winter headwinds are just speed bumps on the path to a tightening oil market, with the winter COVID wave delaying but not derailing the oil market rebalancing, with normalized OECD stocks, OPEC+ spare capacity returning to 1Q20 levels and finally needed shale production growth all occurring by 4Q21."
“This leads us to reiterate our recommendations to be long Dec. 21 Brent forwards, our preferred expression of oil’s 2021 rally, as well as for producers to wait to hedge.”
Read more: https://www.investing.com/analysis/comm ... -200546237