Goldman sees upside risks to $90/bbl Brent price forecast

Goldman Sachs said a strong rebound in global oil demand could push Brent crude oil prices above its year-end forecast of $90 per barrel.

The U.S. investment bank said it expected oil demand will shortly reach pre-COVID-19 levels of around 100 million barrels per day (bpd) as consumption in Asia rebounds after the Delta COVID-19 wave.

In addition, the bank estimated gas-to-oil switching may contribute at least 1 million bpd to oil demand.

"While not our base-case, such persistence would pose upside risk to our $90/bbl year-end Brent price forecast," Goldman said in a research note dated Oct. 24.

Tight global supply and strong demand have pushed oil prices to multi-year highs, with U.S. West Texas Intermediate crude futures trading at $84.38 a barrel and Brent crude futures at $86.26 by 0731 GMT on Monday. [O/R]

"We would need prices to rise to $110 /bbl to stifle demand enough to balance the market deficit we currently see in 1Q22 given our expectation that OPEC+ continues on the current path of +0.4 mb/d per month increases in quotas."

The Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+ earlier this month said it would continue an existing deal under which it agreed to boost output by 400,000 bpd a month until at least April 2022.

On China, Goldman said: "Despite the recent power cuts and impacts to industrial activity in China, oil demand is likely instead supported by switching to diesel powered generators and diesel engines in LNG trucks, as well as by a ramp up in coal production."