Analyst sees $80 Brent within six months

Goldman Sachs Group Inc. has hiked its short-term crude oil price forecast by as much as 33%, saying the market is now likely balanced.

Offshore staff

NEW YORK – Goldman Sachs Group Inc. hiked its short-term crude oil price forecast by as much as 33%, saying the market is now likely balanced.

According to a Bloomberg report, the bank now estimates that Brent will reach $75/bbl over the next three months and will climb to $82.50/bbl within six months. The previous estimate for both time periods was $62/bbl.

"The rebalancing of the oil market has likely been achieved, six months sooner than we had expected," Goldman's analysts wrote. "The decline in excess inventories was fast-forwarded in late 2017 by stellar demand growth, high OPEC compliance, heavy maintenance as well as collapsing Venezuela production."

Goldman joins other Wall Street banks including Morgan Stanley and JPMorgan Chase & Co. in ratcheting up its outlook, as economic growth and output cuts led by OPEC have helped to boost oil prices. Morgan Stanley recently said Brent will reach $75/bbl this year, while JPMorgan said it could rise to near $78/bbl as oil markets tighten more rapidly than expected.

Brent for April delivery traded up 52 cents at $69.41/bbl in London after earlier rising to $69.67/bbl. The global benchmark last touched $75 in late 2014.

Goldman's bullish outlook is driven by its revised demand forecasts, reflecting stronger economic growth in emerging markets.

Record bullish bets in the oil market are "actually not that elevated when viewed in the context of broader portfolio allocation," according to the Goldman report.

Goldman said its view was cyclical, noting that US shale production, the eventual end of OPEC's oil cuts and higher non-OPEC production will eventually pull down Brent prices to $60/bbl by 2020.

02/01/2018

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