Oil Price Fundamental Daily Forecast – Rangebound but Supported by Goldman’s Optimistic Forecast

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Monday, rebounding from earlier weakness as buyers shrug off a stronger U.S. Dollar that could reduce foreign demand for the dollar-denominated commodity. Traders are also reacting to a report from Goldman Sachs that suggests a tight oil market in the first half could push crude to $65.

At 12:39 GMT, March WTI crude oil is trading $52.72, up $0.52 or +1.00% and April Brent crude oil is at $55.79, up $0.75 or +1.36%.

Goldman Sees Tight Supply

Oil prices could rise to $65 a barrel by July amid a tight oil market and slow rebound in demand, Goldman Sachs said.

The bank said in a note on Sunday data indicated a deficit of 2.3 million barrels per day (bpd) in the fourth quarter of 2020 driven by higher demand and lower supplies from producers outside the OPEC+ group.

It forecast a deficit of 900,000 bpd in the first half of 2021, a higher level than its previous prediction of 500,000 bpd.

This could help push benchmark Brent crude to $65 a barrel by July, with less industry investment in supply skewing risks to the upside in 2022, the bank said. Brent was above $55 on Monday.

“We are moderating the demand rebound to account for a slower start of vaccination and a cautious pace of reopening, leading in particular to a slower recovery in jet demand,” Goldman said.

The bank expected demand to rise by 5.3 million bpd in six months to July, down from its previous forecast of 6.8 million bpd.

Daily Forecast

In order to drive prices to $65 a barrel, OPEC+ is going to have to continue to work together and agree on policy. Any glitches or disagreements could dissolve the group. We’ve seen it before. As prices rise, many countries, especially Russia, may decide to ramp up production. Right now, OPEC+ compliance is at about 85%. They are going to have to hold this level steady in order to hit $65 in my opinion.

Saudi Arabia will be the key to holding the group together. It has pledged to make additional, voluntary oil output cuts in February and March, while most of OPEC+, agreed to keep output steady.

“The nature of the latest OPEC+ agreement will also contribute to this fast tightening market as higher demand this spring will stress the ability of producers to restart production,” Goldman said.

Whether demand increases will depend on ramping up the vaccine rollout and controlling the coronavirus variants. We’ll know if the demand curve is moving positive if air travel begins to increase.

For a look at all of today’s economic events, check out our economic calendar.