Goldman raises Q3 Brent price forecast to $75/bbl on lagging supply view

Goldman Sachs Commodities Research raised by $10 its Brent crude oil price forecasts for the second and third quarters of 2021, citing lower expected inventories, higher marginal costs to restart upstream activity and speculative inflows.

The Wall Street bank expects Brent prices to reach $70 per barrel in the second quarter from the $60 it predicted previously and to $75 in the third quarter from $65 earlier.

"We believe this faster rebalancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as demand rebounds faster than supply, setting the stage for a tight physical market," Goldman said in a note dated Sunday.

The bank now expects global oil demand to reach 100 million barrels per day (bpd) by late July 2021 versus its previous expectation of August 2021.

Oil prices rose on Monday as the slow return of US crude output that was cut by frigid conditions raised concerns about supply just as demand rebounds.

Goldman expects the freeze in Texas to lead to a 1.5 million bpd global deficit this month and cut output by 0.2 million bpd in March due to infrastructure damage and missed completions.

Read | Why petroleum prices may not come down anytime soon

An agreement to hike production by the Organization of the Petroleum Exporting Countries and its allies in the upcoming March meeting will not be bearish for prices as supply is set to lag, Goldman said.

It expects a 0.5 million bpd increase in quotas in April, with Saudi Arabia reversing its unilateral 1 million bpd cut, and continues to expect moderate exports from Iran this year.

"The key uncertainty for now is at which price level producers finally ramp-up activity... we are raising our marginal cost assumption by $5 per barrel to $60 per barrel Brent for the remainder of 2021," Goldman said.

Last week, UBS raised their Brent price forecast to $68 per barrel for the second half of this year.