Goldman sees limited Delta impact, but cuts Brent price forecast
Quantum Commodity Intelligence – US investment bank Goldman Sachs said Tuesday it sees the impact of the Covid-19 Delta variant as limited, but has adjusted its firm price forecast following the sharp sell-off Monday that saw oil futures drop by around 7% from pre-weekend levels.
The note sent Tuesday follow's Goldman's client note Sunday, where it saw the OPEC+ deal as bullish and reaffirmed its Q3 2021 forecast of $80/b Brent or above.
"Our bottom-up estimate of the impact that a Delta wave could have on global demand points to a potential 1 million bpd hit for only a couple months, and even less if vaccines prove effective at lowering hospitalizations in developed markets, the origin of most summer demand improvements," said Goldman in the latest report.
The bank, which was the first to flag the potential for $80/b crude earlier in the year, maintains a 'constructive view on oil prices' but said the front-loaded demand hit, "leads us to swap our quarterly forecasts; now expecting 3Q 2021 Brent prices to average $75/b with 4Q 2021 at $80/bbl."
The note on Sunday did not specifically reference a Q3 average above $80/b, but stated, "a $2/bbl upside to our $80/bbl summer and $5/b upside to our $75/b 2022 Brent price forecasts."
Goldman warned Tuesday of increased volatility given the uncertainties of the Delta variant, but broadly sees the upside as intact.
"We believe that the oil market repricing to a higher equilibrium is far from over, with the bullish impulse shifting from the demand to the supply side."
Goldman added that it now forecasts a 3Q 2021 supply/demand deficit of 1.5 million bpd (vs. 1.9 million bpd previously) and a 4Q deficit of 1.7 million bpd, 'that is increasingly concentrated in OECD markets'.
The bank also sees year-end OECD oil inventories at their lowest level since late 2013 when normalized by days of forward demand, which will, "assist with the recovery in timespreads of Atlantic basin crudes and physical markets."
