By Adedapo Adesanya
Oil prices jumped more than 3 per cent on Monday as investors banked on information from Goldman Sachs Group predicting prices will advance into the $70s in the coming months.
The international benchmark, Brent crude futures, gained $2.29 or 3.64 per cent to trade at $65.23 per barrel, while the United States’ benchmark, West Texas Intermediate (WTI) crude futures, rose by $2.45 or 4.14 per cent to sell at $61.69 per barrel.
The top investment bank said in its latest forecast that Brent will reach $70 a barrel in the second quarter and $75 in the following three months, lifting its previous Q2 and Q3 forecasts by $10 per barrel.
“Faster re-balancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as the ramp-up in OPEC+ production lags our above-consensus demand recovery forecast,” said Goldman Sachs.
“We further believe that this additional rally will be supported by the current repositioning for a reflationary environment with investors turning to oil, buying a lagging real asset that benefits from a stimulus-driven recovery and has demonstrated an unmatched ability to hedge against inflation shocks,” the analysts noted.
Goldman expects the lower inventories to lead to an oil price rally sooner and at higher price levels.
Prices were also supported after the gradual resumption of some US output following frigid weather which cut off fuel supplies put prices under pressure on Friday.
Meanwhile, the market is set for another tussle on the supply cut side as leaders of the coalition of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, Saudi Arabia and Russia head toward their meeting next week with differing opinions on whether to add more supply to the market in April.
The kingdom wants to hold output steady, according to delegates, but Russia is indicating that it still wants to proceed with an increase.
Crude has gained more than 20 per cent this year after a January pledge from Saudi Arabia to deepen production curbs turbocharged a rally triggered by COVID-19 vaccine breakthroughs.
Investors will be studying the developments between Iran and the US as the Middle East producer renewed demands that the Joe Biden-led administration rejoins the nuclear accord and lift crippling sanctions on the Iranian economy before talks can resume.