Goldman Sachs Hikes Q3 Oil Price Projection to $140 on Unresolved Structural Shortages
2022.06.07 15:30
Goldman Sachs Hikes Q3 Oil Price Projection to $140 on Unresolved Structural Shortages
By Senad Karaahmetovic
Goldman Sachs strategist Damien Courvalin sees oil prices continuing to surge in summer as key structural shortages are still unresolved.
Oil prices are likely to keep soaring to normalize the low levels of supply, Courvalin told clients in a note.
The strategist noted that the oil market was even tighter in April than what he had expected given the decline in Russian output and lockdowns in China.
“Supply remains inelastic to higher prices with core-OPEC (higher) and exempt countries (lower) production shifts broadly offsetting. On the demand side, the negative global growth impulse remains insufficient to rebalance inventories at current prices. As a result, we believe oil prices need to rally further to normalize the unsustainably low levels of global oil inventories, as well as OPEC and refining spare capacities,” Courvalin said in a client note.
Therefore, Courvalin projects Brent prices will need to average $135/bbl in the second half of this year and the first half of the next year 2023 for inventories to finally normalize by late 2023. The Brent price forecast for Q3 is hiked to $140 from $125.
“This represents summer retail prices reaching levels normally associated with $160/bbl crude prices (due to strong refining utilization, gas prices and USD) to achieve the additional 0.5 mb/d of price-induced demand destruction required to rebalance the market next year in addition to (1) global GDP growth exc. China slowing to 2% yoy, (2) record output from Saudi/UAE/Iraq and (3) Iran/Venezuela/Libya production rising 1.3 mb/d.”
Along these lines, Goldman Sachs (NYSE:GS) commodity analyst Neil Mehta raised price targets on Super Majors to reflect a higher oil outlook.
The analyst reiterated his bullish stance on ConocoPhillips (NYSE:COP) and ExxonMobil (NYSE:XOM). New price targets on COP and XOM are $140.00 and $117.00, from $130.00 and $104.00 previously, respectively.
