Goldman sees upside risks to $90/bbl Brent forecast

(Reuters) – Goldman Sachs said a strong rebound in global oil demand could push Brent crude prices above its year-end forecast of $90 a barrel.

The US investment bank said it expects oil demand to return to pre-Covid-19 levels of around 100 million barrels per day (bpd) shortly as consumption in Asia recovers from the Delta wave of COVID- 19.

In addition, the bank estimated that the shift from gas to oil may contribute at least 1 million bpd to oil demand.

“While not our base case, such persistence would pose a positive risk to our year-end Brent price forecast of $90/bbl,” Goldman said in an Oct. 24 research note.

Tight global supply and strong demand pushed oil prices to multi-year highs, with U.S. West Texas Intermediate crude futures trading at $84.38 a barrel and Brent crude futures at $86.26 by 0731 GMT on Monday. (OR)

“We would need prices to rise to $110/bbl to dampen demand enough to balance the market shortfall we currently see in 1Q22, given our expectations for OPEC+ to continue on the current +0.4mb trajectory /day per month of quota increase”.

The Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+, earlier this month said they would continue an existing agreement under which they agreed to increase production by 400,000 bpd a month until at least April 2022.

On China, Goldman said: “Despite recent blackouts and the impact on industrial activity in China, oil demand is likely to be supported by a shift to generators and diesel engines in LNG trucks, as well as an increase in coal production . “

(Reporting by Seher Dareen and Nakul Iyer in Bengaluru. Editing by Jane Merriman)