Goldman Sachs has reiterated its forecast that Brent crude will hit $80 per barrel this summer as demand quickly recovers.
"Rising vaccination rates are leading to higher mobility in the U.S. and Europe, with global demand estimated up 1.5 mb/d (million barrels per day) in the last month to 96.5 mb/d," the investment bank said in a note as quoted by Reuters.
Goldman first said it expected Brent to hit $80 this year in March, expecting this to happen by the third quarter of this year.
Then, in April, the bank reiterated its forecast, noting, "The magnitude of the coming change in the volume of demand -- a change which supply cannot match -- must not be understated."
A month later, Goldman analysts wrote that "The case for higher oil prices therefore remains intact given the large vaccine-driven increase in demand in the face of inelastic supply," referring to the possibility that the United States and Iran will reach an agreement on the latter's nuclear program that would lead to the lifting of U.S. sanctions.
The lifting of the U.S. sanctions on Iran is unanimously seen as bearish for oil prices, but observers differ in their opinion on exactly how bearish it would be. According to Goldman, the return of Iranian oil to global markets will not have a significant effect on demand dynamics and, therefore, prices.
Indeed, earlier this week, the U.S. lifted some sanctions against Tehran officials, and prices fell but not for long. At the time of writing, Brent was trading above $72 per barrel and West Texas Intermediate was changing hands at $70.72 per barrel.
Meanwhile, OPEC has said it expected oil demand to rise by 6 million bpd this year, and the International Energy Agency forecast it would add 5.4 million bpd this year and another 3.1 million bpd next year, returning to and exceeding pre-pandemic levels to reach 100.6 million bpd by the end of 2022.
By Charles Kennedy for Oilprice.com
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Moreover, the fact that global oil demand is virtually back to pre-pandemic level of 101 million barrels a day (mbd) gives more credence to an $80 oil soon.
Lifting the US sanctions on Iran is neither bearish no bullish since it isn’t going to happen even in 2023 or ever. The reason is that the positions of the United States and Iran are irreconcilable.
The lifting of sanctions on three Iranian officials is of no significance whatsoever. For Iran, only a total lifting of sanctions could entice it to have direct negotiations with the United States over the nuclear deal.
Moreover, Iran’s position could only harden towards the United States because the supporters of the Islamic Revolutionary Guard Corps (IRGC) are headed for a landslide victory in the presidential elections on the 18th of June. They will do their very utmost to derail negotiations with the United States unless they get a deal on their own terms.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
This is hardly the wheat market back in the 1890s when my Leiter side of the Family tried to corner that should be noted as well.
Any sudden move to the downside could trigger staggering losses that simply put would never be possible to recover from for years or perhaps decades.
US Fed Chair Powell still doing a great job but you can't fight the mania either.