Oil will surge 21% this year even as spiking COVID-19 infections hamper near-term demand, Goldman Sachs says
Oilcould surge 21% this year, even as near-term demand is hurt by rising COVID-19 infections, Goldman Sachs said in a note on Tuesday.
- Oil extended its two-day surge to as much as 7% on Wednesday, with the rally sparked by Saudi Arabia's surprise decision to cut oil production by 1 million barrels per day on Tuesday.
- The most rational explanation to Saudi Arabia's oil production cut is "a large expected slowdown in global oil demand" driven in part by rising COVID-19 infections.
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Brent crude oil could surge to $65 per barrel by the end of 2021, even as near-term demand is set to be weak due to rising COVID-19 infections, Goldman Sachs said in a note on Tuesday. A move to $65 would represent potential upside of 21% as of Tuesday's close.
Brent traded up as much as 1% in Wednesday trades, extending its two-day surge to as much as 7%. The initial rally was sparked by Saudi Arabia's surprise decision to cut its oil production by 1 million barrels per day throughout February and March.
The oil production cut was a surprise to the
"A large expected slowdown in global oil demand [is] the most rational explanation for Saudi's cut," Goldman said, adding that Saudi undermined its efforts since April to have OPEC+ members implement similar cuts.
Russia and Kazakhstan will increased their oil output by a combined 75,000 barrels per day in February and March.
In fact, Goldman's high-frequency oil demand data suggests that recent aggressive lockdowns in countries like the UK have already weighed on oil demand, according to the note.
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