By Adedapo Adesanya
As the oil market continues to make slow recovery on the back of production cut from oil producers, global investment firm, Goldman Sachs, has raised its estimate for price of the Brent Crude next year.
The bank revised up its projection for the international oil benchmark, under which Nigeria’s crude grade is priced, to $55.63 per barrel from $52.50 per barrel previously expected.
There was also review of estimate for the US West Texas Intermediate (WTI) Crude price in 2021 to $51.38 per barrel from $48.50 earlier estimated.
The market had been plagued by lower demand as a result of coronavirus disease, which made many countries of the world to restrict movement and flights. This has been on for two months and it was only few days ago few nations began to ease the lockdown.
Goldman Sach Equity Research stated in its latest report that, “Oil production has started to decline quickly from a combination of scaleback in activity, shut-ins and core-OPEC/Russia production cuts.
“Demand is also beginning to recover from a low base, led by a restarting Chinese economy and improving transportation demand in developed market economies.”
As countries around the world continue to ease lockdowns, a period that complements when the commencement of the supply cut signed by the Organisation of the Petroleum Exporting Countries and allies (OPEC+), things are anticipated to get better.
OPEC+ agreed to remove 9.7 million bpd from the market in May and June and the course for prices to latch on is on the right path.
However, despite the ease and the cut, the huge problem of demand and expectations still remain in place due to the coronavirus.
While Goldman Sachs doesn’t expect oil prices to jump too much in the coming weeks, it remains bullish about oil demand in 2021 and the fact that major oil producers would slash production—OPEC+ because of their collective pact, and the US and Canada because of market conditions.
As at the time of report, Brent Crude is up by 9.7 percent at $29.84 per barrel, while the WTI was up by 10.4 percent at $25.23 per barrel.
This development has excited the United States President, Mr Donald Trump, who reacted to it on his Twitter page today, saying, “Oil prices moving up nicely as demand begins again!”
Modupe Gbadeyanka