Oil prices will rise “faster and faster.” Expect $ 75 Brent Crude This Year, Says Goldman Sachs

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How much higher can oil prices rise this year? Try $ 75 a barrel. That’s according to the latest forecast from the Goldman Sachs commodities team, which expects global benchmark Brent oil to hit that level in the third quarter, $ 10 above its previous forecast and $ 70 in the second quarter. Those gains will be driven by long-term prices and a sharp pullback, when futures prices are below spot prices, the team said.

“We now forecast oil prices to rise higher and higher, driven by lower expected inventories and higher marginal costs, at least in the short term, to restart upstream activity,” said the team: Damien Courvalin, Callum Bruce, Jeffrey Currie and Huan Wei: In a note to clients dated Sunday. “We further believe that this further rally will be supported by the current repositioning for a reflationary environment in which investors turn to oil, buying a lagging real asset that benefits from a stimulus-driven recovery and has demonstrated an unmatched ability to hedge against the inflationary shocks, ”the team added.

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Hopes for an economic recovery from the pandemic, fueled by the launch of COVID-19 vaccines, have been pushing investors out of the safe haven of bonds and into commodities and other assets. The yield of the 10-year Treasury bond TMUBMUSD10Y, 1,351% reached 1,372% on Monday, after gaining 14.5 basis points last week. US and European stocks fell. While they are off their recent highs when Texas and other US states thawed from an intense and rare freeze, oil prices remain at levels not seen in more than a year, with intermediate crude futures at April West Texas CLH21, + 3.02% to $ 59.69 a barrel, and May Brent BRNK21, + 2.75% to $ 62.70 a barrel. On the fundamentals supporting prices, the team sees “better-than-expected demand and still depressed supply, once again creating a larger deficit than we expected in January and February.” Starting in the spring, the oil deficit is likely to widen as not even the increased production of OPEC + (Organization of the Petroleum Exporting Countries and other producers such as Russia) can keep up with the “forecast of recovery of demand above the consensus “of the bank. Furthermore, he expects the recovery of Iran’s exports to take months. As vaccines and hot weather drive demand for planes, Courvalin and the team expect overall global demand to reach 100 million barrels per day by the end of July 2021 versus August 2021 previously, the team predicts.

As for investors, they suggest positioning themselves for those higher prices through a moving index for the first month “to capture a high level of cross assets of 10% annualized positive carry”, or a long position of Brent futures in December of 2021 that they first suggested in August, which “still offers a compelling entry point given the recent flood of producer coverage.” The carry represents a return, in this case positive, that can be expected in the coming year assuming unchanged cash and valuation prices.