Oil price predicted to hit $70 per barrel in second quarter

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Goldman Sachs Group Inc. has raised its price estimates and is predicting that Brent will reach $70 a barrel in the second quarter and $75 in the following three months, $10 above its previous forecasts, according to a note.

Consumption will get back to pre-virus levels by late July, while output from major producers will remain “highly inelastic” to the rising prices, the bank said.

Brent oil resumed gains as the market assessed the fallout from the big freeze across Texas.

Futures in London rose back above $63 a barrel yesterday after faltering at the end of last week as U.S. production slowly resumed following an easing of temperatures. A robust recovery from the Covid-19 outbreak had pushed prices to the highest settlement in over a year on Wednesday and Goldman sees the rally accelerating as demand outpaces supply from OPEC+, shale and Iran.

Saudi Arabia and Russia, meanwhile, are heading toward an OPEC+ meeting next week with differing opinions about adding more supply to the market in April. The kingdom wants to holds output steady, according to delegates, but Moscow is indicating that it still wants to proceed with an increase.

Crude has gained more than 20 per cent this year after a pledge from Saudi Arabia last month to deepen production curbs turbo-charged a rally triggered by Covid-19 vaccine breakthroughs. Brent’s prompt timespread has firmed in a bullish backwardation structure, signaling a tighter market and helping to unwind global stockpiles built up during the pandemic.

Oil prices are likely to see increased volatility over the next week as the market gets more clarity on how quickly U.S. refining capacity will return and as the OPEC+ gathering nears, said Warren Patterson, head of commodities strategy at ING Bank NV.

Iran and the U.S., meanwhile, sparred over how to revive a nuclear deal, reflecting the challenge ahead for the Biden administration even as nuclear inspectors persuaded Iran to temporarily allow some wider monitoring. Tehran over the weekend renewed its demand that the new U.S. administration rejoin the accord and lift crippling Trump-era sanctions on the Iranian economy before talks can resume.

– Agency Report

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