Author: Mike Rock
Forecasting a bullish market, Goldman Sachs predicts oil prices could soar to $100 per barrel in the short term and continue rising into 2023, a clear sign that motorists should expect to pay more for fuel soon.
In the U.S., West Texas Intermediate (WTI) surged 2.9% to hit $77.30 per barrel and even peaked at $77.81, while the international benchmark, Brent, was up 2.9% at $82.43 after a high of $82.91.
Goldman Sachs Prediction
Recently, Goldman Sachs (GS) reported to clients that it was confident in its positive outlook for the oil market, citing “robust fundamentals,” an unexpected supply gap, and decreasing support from OPEC and its associates.
Additionally, GS noted a growing reluctance from investors to fund oil due to the transition to alternative energy sources.
The bank anticipates that oil stockpiles in developed nations will hit their lowest point since 2000 in the summer.
Goldman Sachs recently estimated that Brent crude, the global standard, could soar to $100 a barrel in the third quarter of this year, an increase from its previous prediction of $80. Goldman anticipates Brent soaring to $105 per barrel by next year, an impressive jump from its prediction of $85.
Why did the Oil Price Rise?
Investors are eagerly betting on diminishing rate hikes due to decreased inflation and Goldman Sachs’s prediction that oil prices will rebound to over $100 per barrel by the end of the third quarter of this year, resulting in remarkable rewards.
Last week marked one of the most dismal openers in the last twelve months, as WTI and Brent tumbled by more than 8%, investors worried about the potential of a worldwide recession and sluggish demand from China, despite the country’s commitment to lifting their stringent COVID-zero policy.
On Wednesday, crude oil prices soared as traders wagered that Thursday’s December U.S. Consumer Price Index (CPI) report would reveal a substantial decrease in inflation figures.
What are the Expectations?
By 2023, the global oil demand is predicted to surge by an additional 2.7 million barrels per day, potentially leading to a market deficit in the latter half of the year, according to a recent note issued by The National U.S. Investment Bank.
Analysts are predicting that the re-opening of China, combined with the massive quantities of crude oil imported by private refiners, portends a revival in Chinese demand when the Covid crisis subsides.
The OPEC+ group is poised to reverse the production cut declared in October this year. With the anticipation of steady demand growth in the coming year, it could potentially happen in the second half of 2023, according to Goldman Sachs. Should the oil demand turn out to be lower than expected, OPEC+ can maintain the output cuts from October or reduce production even more due to their pricing power, the bank noted.
Goldman Sachs highlighted that the ‘Opec put’ effectively curbs any potential downside risks associated with their bullish oil price forecast.
Bottom Line
The bank’s strategists forecasted that commodities would be the most prosperous asset class in 2023. As the economy is predicted to slow down, the opening months of 2023 may be lackluster compared to the remainder of the year. Despite the comparatively low levels of investment in oil, gas, and vital metals, Goldman Sachs has proclaimed a commencement of a new ‘supercycle’ in commodities.
