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Goldman's Currie sees 'lot of upside risk' to year-end $90/b Brent price call

Highlights

Bank estimates current oil supply deficit at 4.5 million b/d

Brent futures still trading near multiyear highs

Sees oil yet to catch up with other surging commodities

Global oil prices could surge well above $90/b by the end of the year unless a current supply deficit amid rebounding energy demand can be reduced in the coming months, Jeff Currie, the head of commodity research at Goldman Sachs said Oct. 20.

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At the end of September, Currie said Goldman estimated that the global oil market was undersupplied by about 4.5 million b/d, or 5% of global demand, as economies bounced back from the pandemic.

"This is a big hole to fill even with the production increases that we have penciled in going from now to the end of this year," Currie said at the India Energy Forum by CERAWeek.

"Maybe you can get that deficit whittled down to 2 million b/d but we'll be at critical operating levels of inventory by year-end."

Goldman raised its forecast for year-end Brent oil prices by $10/b to $90/b at the end of September to reflect rebounding demand, gas-to-oil switching, and the impact of Hurricane Ida on US supplies.

Referring to the bank's $90/b Brent forecast, Currie added that "there's a lot of risk to the upside around these targets".

Brent crude oil futures dipped in midday European trading Oct. 20 to $84.25/b but remained close to multiyear highs after surging more than $10/b since mid-September.

Currie said he thinks oil prices have further to rise, and are still playing catch up to the spiraling values seen for power, gas and other commodities like copper and aluminum in the recent weeks due to a supply deficit.

"The only reason why oil is lagging these other markets is that it was at the epicenter of the demand hit from COVID ... we think it's just a matter of months until oil joins the ranks of the rest of these commodities," Currie said.

At the end of September, S&P Global Platts Analytics forecast that Dated Brent would average in the "upper $70s" during the fourth quarter of 2021 and dip to average $70-$75/b in 2022.

It said gas-to-oil switching, improving demand in Asia and tighter inventories could boost crude prices into early 2022 before increased supply from the OPEC+ producer grouping and elsewhere limits the upside.