Goldman Sachs raised its second-quarter and full-year forecasts for global oil benchmark Brent crude futures, citing signs of improvement in fundamentals with quickly declining supplies and improving demand as lockdown measures are eased gradually.
The bank raised its second-quarter 2020 Brent price forecast to 25 dollars per barrel from 20 dollars previously, while also slightly raising its full-year forecast for Brent to 35.8 dollars per barrel from 35.2 dollars.
Its forecast would still leave oil prices down sharply on the year. Brent averaged 64.16 dollars a barrel in 2019, so Goldman’s upwardly revised forecast of 35.80 dollars for this year would still represent a decline of about 44 percent.
“It now appears likely that the market is passing its test on storage capacity, due to improving fundamentals, new creative forms of storage being put in place and a likely c.1 million barrels per day smaller May surplus than previously expected,” the bank said in a note.
“We believe the recent rally can extend further in May, back to cash-cost levels (25 dollars per barrel for WTI), albeit with still-high price volatility,” it said.
However, the bank added that the physical oil market is still in surplus and the inﬂection into a deﬁcit is still weeks away.
“Beyond this relief rally, we caution that the oil bull market that we forecast will take time and require patience,” the bank added.