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Goldman Sachs Sees Brent Crude Hitting $90 By Year-End

The bullish impact of Hurricane Ida has 'more than offset the ramp-up in OPEC+ production since July,' Goldman said.
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Goldman Sachs energy analysts have lifted their year-end Brent oil forecast to $90 from $80, citing the impact of Hurricane Ida.

Brent recently traded at $79.58, up 2%.

“Brent oil prices have reached new highs since October 2018, and we forecast that this rally will continue,” wrote Goldman analysts led by Damien Courvalin.

“While we have long held a bullish oil view, the current global oil supply-demand deficit is larger than we expected, with the recovery in global demand from the [Covid] delta impact even faster than our above-consensus forecast and with global supply remaining short of our below-consensus forecasts.”

As for Ida, the hurricane has "more than offset the ramp-up in OPEC+ production since July, with non-OPEC+ non-shale production continuing to disappoint,” the analysts said.

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“On the demand side, low hospitalization rates confirm that vaccines are effective and are leading more countries to reopen, including to international travel in particularly Covid-averse countries in Asia.

“Winter demand risks are now squarely skewed to the upside, as the global gas shortage will increase oil-fired power generation (for which we are positioned for with our long first-quarter 2022 Singapore fuel oil trade recommendation).”

And next year: “While we do expect short-cycle production to respond by 2022 at our higher price forecast, from core-OPEC, Russia and shale, this will only lay bare the structural nature of the oil-market repricing,” the Goldman analysts said.

Meanwhile, ExxonMobil  (XOM) - Get Free Report, Occidental Petroleum  (OXY) - Get Free Report  and Baker Hughes  (BKR) - Get Free Report made a Goldman list of energy stocks that generated negative total returns over the past five years but appear  set to rebound.