Oil prices are likely to decline in the coming weeks due to uncertainties about the future demand path and a 'daunting' inventory overhang, Reuters reported referring to the Goldman Sachs' note dated Monday.
“The collapse in (refining) margins to unprecedented lows is reflective of both over-valued crude prices as well as a more moderate demand recovery, two pillars of our short-term bearish view,” the Wall Street bank said.
Goldman expects Brent prices to reach $ 35 per barrel in the short term. On Monday, the price reached $ 43.
Oil prices climbed Monday to three-month highs after OPEC + nations agreed to extend the record decline in production of 9.7 million barrels per day for a month.
Brent futures cost around $ 41 a barrel on Tuesday. The indicative variety has risen in price by over 150% since April, when the price fell to $ 15.98, the lowest since June 1999.
The West Texas Intermediate (WTI) is currently valued at nearly $ 38.4 per barrel.
Goldman raised its Brent price forecast in 2020 to $ 40.40 per barrel from the previous estimate of $ 35.60, noting positive expectations for the opening of economies as the COVID-19 restrictions ease. For WTI, the forecast has been improved to $ 36 per barrel from $ 33.10.
The recovery in prices was facilitated by demand for risk and record oil imports by China, but fundamental indicators look weak, Goldman noted.
Demand expectations are ahead of the more gradual and still uncertain economic recovery, and the oil market has to deal with a serious problem with excess reserves of billions of barrels.
Goldman expects raw material supply to increase as the shale industry in the US revives and Libyan oil returns to the market. As a result, the deficit in June may reach 1.2 million barrels per day instead of the previous forecast of 2 million barrels per day.
