Goldman Sachs cut its forecast for the price of Brent crude on Tuesday to $75 a barrel in the third quarter, down $5 from its previous estimate, as a surge in infections with the “delta” strain of the Corona virus weighs on demand.
Oil prices fell by five dollars on Monday, due to concerns that demand will be affected by the high infections of the “Delta” virus and the “OPEC +” agreement to boost production.
The bank now expects a deficit in the third quarter of 1.5 million barrels per day, compared to 1.9 million barrels per day in the previous forecast. Goldman also expects that Brent prices will average $80 per barrel in the last quarter of the year from its previous forecast of $75 per barrel, and predicts a deficit of 1.7 million barrels per day in the same period.
Goldman said that even if vaccinations fail to reduce patient admission rates to hospitals, which may lead to a greater decline in demand, the decline will be compensated by less production from “OPEC +” and US shale oil, given the current prices. “Oil prices may continue to fluctuate sharply in the coming weeks, given the uncertainty surrounding the “delta” strain and the slow pace of developments on the supply side compared to the recent demand gains,” he added.
Goldman also said the faltering progress on the US-Iran nuclear deal raised the risk that a potential improvement in Iranian exports would come later than a baseline scenario set by the Bank in October.