Goldman Sachs says oil prices could be higher for much longer
Oil prices could stay at higher levels in the years to come as demand rebounds while supply remains tight, according to Goldman Sachs’ head of energy research.
Damien Courvalin, who is also a senior commodity strategist, said the market fundamentals warrant higher prices and that the bank’s forecast for Brent crude is $85 per barrel for the next several years.
Goldman Sachs’ base case is for Brent to hit $90 per barrel by the end of the year.
‘Warning sign’
What’s happening in the coal market — where prices are at record highs because supply shrank faster than demand — is a “warning sign” for oil, Courvalin said.
Oil drilling activity hasn’t recovered much on the supply side, while demand is growing, he said, describing the market as being in an “entrenched deficit.”
Despite oil futures climbing more than 60% this year and hitting multi-year highs, Courvalin said oil producers haven’t increased supply.
“Demand is rebounding further and we need to really start to see that investment,” he said.
Shale producers, however, are focused on returning cash to shareholders.
“That’s the key of the sustainability of higher prices,” he said, adding that he sees oil demand hitting new record highs in 2022 and 2023.
“The fundamentals actually very much support the view of higher prices than we’ve seen, pretty much since 2014,” he said.
Reference: CNBC
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