Goldman sees oil market recovery gathering pace in 2021

Goldman Sachs expects Brent prices to rally in 2021, bolstered by a tighter oil market and as an economic recovery from the coronavirus-induced slump gathers pace, helped by a possible vaccine.

Goldman forecast Brent prices to rally to $65 per barrel by the third quarter of 2021 and average $59.40 for the year.

“Key to the resilience of spot prices despite stalling inventory draws this summer has been the steady rally in long-dated prices,” the bank said in a note dated Aug 30.

The rally in long-dated prices reflects improving growth prospects for next year, Goldman added.

Brent prices have rebounded sharply since plunging to a more than 20-year low in April, helped by production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+), and as many economies began to ease lockdown measures.

“There is a growing likelihood that vaccines will become widely available starting next spring, helping support global growth and oil demand, especially jet,” the bank said.

The Wall Street bank saw demand rising by 3.7 million barrels per day from January to August next year.

It forecast oil supply to be tighter in 2021 as OPEC+ will likely stick to its production quota in the second half of 2020 and a rebound in shale activity stays limited.

OPEC+ eased output cuts levels to 7.7 million barrels per day (bpd) this month from a record-high 9.7 million bpd - or 10% of global supply - between May and July 2020 - to help balance supply with collapsing demand.