Goldman Sachs is bullish on oil, expecting the market to be in a deficit of around 3 million barrels per day (bpd) by the fourth quarter and Brent Crude prices to recover to $49 a barrel by the end of this year, from $43 early on Friday.
According to a new report from Goldman analysts, carried by Reuters, the recent floating storage of oil is more "transient inventory allocation dynamics" instead of a signal of a new glut.
"We estimate that the oil market remains in deficit with speculative positioning now at too low levels," Goldman Sachs said, keeping its Brent Crude target at $49 by end-2020 and $65 by the third quarter of 2021.
Earlier this month, Goldman Sachs forecast Brent Crude to reach $65 a barrel in the third quarter of 2021, although it could end next year lower, at $58 a barrel.
Goldman Sachs also expects WTI Crude to rally to $55.88 a barrel by the third quarter of 2021, up from $51.38 a barrel in earlier forecasts.
"There is a growing likelihood that vaccines will become widely available starting next spring, helping support global growth and oil demand, especially jet," the Goldman analysts said earlier this month, and are keeping that view.
Vitol Group, the world's largest independent oil trader, also expects global oil inventories to continue drawing down for the rest of the year, unlike its rivals and many analysts who see a growing glut on the market.
The world's stockpiles of oil have diminished by around 300 million barrels since peaking at 1.2 billion barrels early this summer, and are expected to decline by another 250 million-300 million barrels between September and December, Vitol's chief executive officer Russell Hardy told Bloomberg in an interview earlier this week.
Vitol looks more bullish on oil's short-term prospects than another major commodity trader, Trafigura, which expects a "supply-heavy" market through the end of the year, with inventories building by the end of 2020 as demand recovery stalls.
By Tsvetana Paraskova for Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- World’s No.1 Oil Trader Sees Crude Inventories Shrinking This Year
- Cash-Strapped Iraq To Finally Roll Out Refinery Megaproject
- BP Bombshell: India’s Oil Demand May Peak In 2025
I am on record having been saying for the last six months that I project a Brent oil price ranging from $45-$50 before the end of this year and touching $60 in early 2021.
The global oil market is currently shifting into a bullish mood underpinned by many bullish influences.
The first is China’s robust rebound and record-breaking crude oil imports. The second is growing indications that global oil inventories have already declined by 300 million barrels in the first half of 2020 and are projected to decline further by 250-300 million barrels between September and December.
A third influence is a growing likelihood that vaccines will become widely available soon with the Russian vaccine being used to inoculate the Russian people in October.
A fourth influence is the steep decline in US oil production by an estimated 6.5 million barrels a day (mbd) or 50% so far this year as a result of the COVID-19 pandemic.
When one considers all these factors and add them to OPEC+ production cuts of 7.7 mbd, one could then tell why oil prices are on an upward trend.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London