Goldman Sachs raised its estimate for WTI Crude prices in 2021 to $51.38 per barrel from $48.50, expecting a gradual recovery in global oil demand and production cuts from OPEC+ and shut-ins elsewhere to support oil prices next year.
“Oil production has started to decline quickly from a combination of scaleback in activity, shut-ins and core-OPEC/Russia production cuts,” Goldman Sachs Equity Research said in a note carried by Reuters.
“Demand is also beginning to recover from a low base, led by a restarting Chinese economy and in?ecting transportation demand in developed market economies,” analysts at Goldman Sachs said in the note.
Together with raising its forecast for WTI Crude, Goldman Sachs revised up its estimate for Brent Crude prices to $55.63 a barrel from $52.50 per barrel previously expected.
At 10:30 a.m. EDT on Monday, Brent Crude was up 1.89 percent at $26.94, and WTI Crude was trading at $20.19, up by 2.22 percent on the day, as some U.S. states and countries in Europe eased lockdowns days after OPEC+ began their pact to remove 9.7 million bpd from the market in May and June.
Even though oil producers finally agreed to cut production by nearly 10 million bpd, the deal will fail to support oil prices in the coming weeks as the agreement, albeit historic, is falling short of the enormous demand destruction and expectations, Goldman Sachs said after the OPEC+ deal was sealed.
After WTI Crude futures dipped to -$37 on April 20, the day before the May contract expired, Goldman’s head of commodities Jeffrey Currie said that the recovery in U.S. oil prices was still weeks away.
While Goldman Sachs doesn’t expect oil prices to jump too much in the coming weeks, it remains fairly bullish about oil demand in 2021 and the fact that major oil producers would slash production—OPEC+ because of their collective pact, and the U.S. and Canada, for example, because of market conditions.