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Supply constraints and a rapidly rebounding global economy from the debilitating COVID-19 pandemic are laying the groundwork for rising oil prices, according to Goldman Sachs global head of commodities research Jeffrey Currie.
“In the short term, our highest long term conviction is oil where we still see brent [crude oil] averaging $ 80 / bbl this third quarter with potential peaks well above $ 80 / bbl. Global demand has likely jumped to 97.0 million barrels per day in recent days, from 95.0 million barrels per day just a few weeks ago, as the United States passes the baton to Europe and to emerging markets, where even India is starting to show improvements, “Currie said in a new research note to clients on Friday.
Certainly, oil prices have had an upward bias lately.
At over $ 73 a barrel right now, Brent crude oil prices are trading at levels not seen since fall 2018. Brent crude prices are up about 55% since the start of the year.
Recent gains in the petroleum sector have been fueled by indications of strong demand meeting low levels of supply.
The Energy Information Administration (EIA) reported this week that US crude oil inventories fell 7.4 million barrels for the week ending June 11. Meanwhile, the National Bureau of Statistics reported that China’s crude oil throughput for the month of May rose 4.4 percent from last year to an all-time high.
Goldman’s Currie warns, “With demand growth so robust against an almost inelastic supply curve outside the core OPEC + (GCC + Russia), the global oil market is facing its largest deficits since last summer at nearly 3.0 million barrels per day. With refiners responding quickly to slight improvements in margins, petroleum product supplies have largely matched this increase in end-use demand, leaving this shortfall almost all crude. DM seasonality only. By then all of the global post-COVID surplus will likely be gone, by which time we believe high crude oil prices could be the catalyst to refocus the market on trade of reflation. “
Brian Sozzi is an editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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