Goldman Sachs Sees Upside Risk to $90 Per Barrel Crude Price Forecast
October 25, 2021
Energy prices rose on Friday, except for ULSD which fell slightly for the nearby futures trading month. WTI crude oil rose for the 9th straight week which is a new record going back to 1983. Prices continue to rally due to low crude oil stocks globally, US fracking staying low, and implied demand in the US rising above pre-pandemic levels for this time of year.
Baker Hughes reported on Friday that crude oil rigs were down by 2 to a total of 443 oil rigs. The US has had 240 fewer oil rigs online since 03/02/2020.
After last week’s inventory report US crude oil inventories are 6% below the five-year average for this time of year. Gasoline inventories are 3% below the five-year average and distillates are 10% below the five-year average.
Commerzbank said a milder winter forecast in the US and falling coal prices put downward pressure on oil prices on Thursday. However, it stated that tight crude oil supplies will limit its downside, with Brent expected to reach $85 per barrel by year’s ends.
Goldman Sachs said it sees upside risk to its $90 per barrel end of year forecast. Goldman said that only a surge in COVID-19 would be the thing that could keep their forecast from being eclipsed.
I have seen a couple of stories that are suggesting the supply chain backlog and shortages of many things may be more of a demand problem. A story in Bloomberg suggested three points. One is the main issue that it is demand not supply creating the problems. Two is that it is a US problem and not a global one. Three is that the Fed should not raise interest rates and hamper the rebound because this issue will go away naturally.