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Goldman Sachs expects Brent crude to reach $65 a barrel next year following the release of an effective Covid-19 vaccine and a limited increase in supply from OPEC+.
However, before this, global demand will drop by 3 million bpd because of the string of national lockdowns in Europe, the investment bank also warned.
OPEC+ is still a major factor for prices, Goldman also said, and if it fails to agree to an extension of the current production cuts, this could cost the oil industry a $5 price drop per barrel.
OPEC+ begins a two-day meeting today to discuss its production control measures. While an extension of the current level of cuts—7.7 million bpd—is the most likely outcome, the cartel is facing growing pressure from U.S. shale producers who have already begun raising production. The rig count has been rising for weeks, with Baker Hughes reporting last week drillers added 10 rigs.
Analyst forecasts for prices vary but appear to all be for an increase from current levels next year. According to CNBC, BCS Global Markets, for example, expects Brent to rise to the mid-50s by the end of 2021. Capital Economics is even more bullish, expecting Brent crude at $60 a barrel next year.
Crude oil prices got a boost recently from a string of potentially promising updates from pharma companies developing vaccines for Covid-19. The rally ended by the end of last week, but at the time of writing, both Brent and West Texas Intermediate were trading at the highest in months ahead of the OPEC+ meeting.
They were, however, down on the day at the time of writing as concern increased about the outcome of the two-day meeting. While a week ago an extension of the deep cuts looked almost guaranteed, reports about internal discords in OPEC have undermined the prevailing optimism.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.