Oil prices will be supported this year by the upcoming massive economic stimulus package in the United States and the low probability of much Iranian oil returning to the global market, according to Goldman Sachs.
The $1.9-trillion COVID relief package proposed by President Joe Biden is set to stimulate the American economy, leading to a rise in U.S. oil demand by around 200,000 barrels per day (bpd) over 2021 and 2022, Reuters quoted a note from the investment bank as saying.
Goldman Sachs has been bullish on oil since the end of last year, seeing Brent Crude averaging $65 in 2021.
Apart from a stronger economy in the United States this year, the bank expects that the issue with the Iranian nuclear deal will not be resolved soon.
The Trump Administration imposed sanctions on Iran’s oil exports in 2018, looking to cut off the oil sales of the Iranian regime, after the United States withdrew from the so-called Iranian nuclear deal.
President Biden, however, has pledged to offer Tehran a path back to diplomacy and a return to the nuclear deal. That is, if Iran returns to full compliance with that agreement, hammered out while Biden was President Obama’s vice president.
President Biden’s initial talks with foreign counterparts and allies will include Iran and the current U.S. sanctions, White House Press Secretary Jen Psaki has said. This signals that the lifting of sanctions on Iran is not an immediate priority for the U.S. Administration.
“Delays in a full return of Iran production would reinforce our bullish oil outlook since we already forecast a tight 2022 crude market with low OPEC spare capacity,” Goldman Sachs analysts said in the note.
The U.S. Administration’s moratorium on all oil and gas leasing in the Arctic National Wildlife Refuge in Alaska, the revocation of the Presidential permit for the Keystone XL pipeline, and the temporary ban on issuance of drilling permits on federal land and waters do not, on their own, mean that the oil market will tighten faster in 2021-2022 than previously expected, according to Goldman.
By Tsvetana Paraskova for Oilprice.com
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