Oil market recovers from Omicron worries
Tight supply with robust demand – oil prices soaring
Goldman Sachs with bullish oil price forecast
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Oil prices are currently soaring. The North Sea variety Brent only reached a seven-year high again on Thursday last week and at times cost over 89 US dollars. The price for a barrel of the US West Texas Intermediate (WTI) variety has meanwhile risen to 87.65 US dollars. An indication that the oil market has freed itself from worries about the new omicron variant of the corona virus. US crude oil has recovered 30 percent in just seven weeks from its Dec. 1 low of $65.57 a barrel, CNN reports.
Surprisingly large deficit on the oil market
The reason for the increase in oil prices in recent weeks is above all the scarce supply with robust demand – despite the currently rampant Omikron variant. The major US bank Goldman Sachs also cites the decreasing firepower of OPEC and its allies and the surprisingly large deficit on the oil market as reasons for its bullish oil price forecast.
As the German Press Agency reports, OPEC+ is sometimes well behind the production targets it has set itself. “The production level of OPEC+ is now 790,000 barrels per day below the agreed level,” reports the dpa analysts at Commerzbank. “So you could say that OPEC+ is now two months behind schedule.” The producing countries actually wanted to expand their daily production by 400,000 barrels since the summer.
According to Goldman Sachs experts, by the summer OECD inventories are likely to fall to their lowest level since 2000, while OPEC+ reserve capacity is likely to fall to a historically low level of around 1.2 million barrels a day.
Goldman Sachs strategists: oil price at 105 US dollars in 2023
Due to these developments, the major US bank Goldman Sachs assumes that the price of oil will rise to US$100 this year and even to US$105 in 2023. The strategists expect that the Brent price will reach the important benchmark of USD 100 per barrel in the third quarter of this year – the experts had previously forecast a price of USD 80. Goldman Sachs had previously set a price of USD 85 per barrel for 2023 instead of the USD 105 per barrel that has now been forecast.
“Importantly, we are not forecasting that Brent will trade above $100/bbl because the oil is running out as shale resources are still large and resilient,” CNN quoted Goldman Sachs strategists as saying Opinion that shale oil “is likely to require ever increasing oil prices given the reluctance to invest in oil during the energy transition” and the gradual depletion of shale capacity over time.
US Energy Information Administration less bullish
However, the oil price forecast by Goldman Sachs strategists contrasts with the US Energy Information Administration (EIA) forecast. It expects a barrel of Brent to cost an average of $75 this year. For 2023, the EIA assumes an average Brent price of USD 68. In addition, according to CNN, Citigroup recently predicted a “radical decline” in energy prices, which will push the Brent price down to $54 by the end of 2023.
However, the EIA points out that the development of oil prices depends heavily on global economic developments and some uncertainties related to the corona pandemic. These could cause oil prices to rise more sharply or even push them below their own forecast. The EIA cites potential new corona variants, the development of oil consumption in the course of the pandemic, the response of central banks to inflation, the duration of and compliance with OPEC+ production targets and the reaction of the US shale industry to the recent relative as some of these decisive factors high oil prices.
Whether the Goldman Sachs strategists are correct in their forecast probably depends on how some of these decisive factors develop and whether new news regarding the corona pandemic may have an even larger impact on oil prices – in one direction or another – in the future will.
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