A colder winter and soaring natural gas prices globally could lead to higher-than-expected oil prices at the end of this year, with the potential for oil hitting $85 per barrel in the fourth quarter, Goldman Sachs (NYSE:GS) says.
Goldman, which has a price forecast of $80 a barrel oil for the last quarter of 2021, believes that the natural gas crunch combined with a colder-than-usual winter in Europe and Asia could pose an upside risk of $5 a barrel to its Q4 price projection, the bank’s analysts said in a note on Sunday carried by Reuters.
“The tightness in global gas supplies creates a clear and potentially meaningful bullish catalyst for the oil market this winter, larger than the downside risk to global oil demand from another Delta-like COVID wave,” the analysts at Goldman Sachs wrote.
According to the investment bank, oil demand could jump by 900,000 barrels per day (bpd) if the coming winter is colder than usual in the northern hemisphere.
Europe’s tight gas market, low wind speeds, abnormally low gas inventories, and record carbon prices have combined in recent weeks to send benchmark gas prices on the continent and power prices in the largest economies to record highs. Record European natural gas prices are sending Asian spot prices of liquefied natural gas (LNG) to record levels for this time of the year, too.
Last week, Bank of America Global Research said that oil prices could hit $100 per barrel over the next six months if we have a colder-than-usual winter, which could be the most important driver of global energy markets in the coming months. BofA sees upside for oil prices amid modest market deficits in the next few months. It also sees potential for oil to hit $100 a barrel earlier than its mid-2022 call from June if the winter is colder than normal.
By Tsvetana Paraskova for Oilprice.com
