Oil price forecast set to hit $49 by year-end, says Goldman Sachs

Brent crude is expected to hit $49 a barrel by the end of 2020 and push on to reach $65 by the third quarter of 2021, according to bullish analysts at US-based investment bank Goldman Sachs.

  • Analysts at Goldman Sachs predict Brent crude will hit $49 a barrel by year-end
  • Many analysts had forecast oil prices to average $50 a barrel in 2021
  • OPEC threatens to take action against members not complying with production cuts

Analysts at Goldman Sachs are bullish about the price outlook for oil, with the US-based investment bank expecting a deficit of around three million barrels per day by the fourth quarter (Q4) 2020, which could push Brent crude prices to $49 before the end of the year.

‘We estimate that the oil market remains in deficit with speculative positioning now at too low levels,’ Goldman Sachs said in a note.

Its analysts are also upbeat about the price of oil over the longer term too, with the bank forecasting that Brent crude could rally to $65 a barrel by Q3 2021.

‘There is a growing likelihood that vaccines will become widely available starting next spring, helping support global growth and oil demand, especially jet,’ Goldman Sachs analysts said.

Brent crude is trading five cents higher at $43.35 a barrel at the time of publication, while the US West Texas Intermediate (WTI) is up 29 cents to $41.26 a barrel.

OPEC to take action against members not complying with cuts

For oil prices to hit the sort of levels that Goldman Sachs predicts next year, it will take a coordinated effort from OPEC+ to keep a close eye on supply and adhere to necessary production cuts to offset weaker demand due to the coronavirus pandemic.

During a meeting on Thursday, OPEC+ agreed to cut output by 7.7 million barrels of oil per day and warned those in attendance that the organisation would take decisive action against any member that chose not to comply with the agreement.

The de-facto leader of OPEC, Saudi Arabia, also warned that more extreme production cuts may be required if oil prices fell further due to weakening energy demand if a second wave of coronavirus cases forces governments to administer additional lockdowns.

WTI rallies by leaps and bounds

Oil continues its impressive recovery, rallying back towards $42, where the price hit resistance on its way down earlier in the month, according to Chris Beauchamp, chief market analyst at IG.

‘Above $42 the next target is $43.60 and the high of August,’ he added.

‘Given the sharpness of the move in recent sessions some consolidation is possible, with a more bearish view requiring a move back below $39.’

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