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The Goldman Sachs head of oil research noted that crude oil production in the US had soared exponentially in the last twelve months.
American investment banking company Goldman Sachs (NYSE: GS) expects an all-time high oil demand, leading to increased crude prices. Speaking to CNBC’s “Squawk Box Asia”, the company noted that the record demand in oil markets would lead to a “sizable deficit”. The head of oil research at Goldman Sachs, Daan Struyven, spoke on the predicted oil prices, stating:
“We expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high.”
According to Struyven, the investment bank has raised its expectation of Brent crude from the current price of $50 per barrel. He said Goldman Sachs’ updated forecast on Brent crude, amid the expected high oil demand, is $86 per barrel by the end of 2023. The US West Texas Intermediate futures are down 0.44% to $76.73, while the ICE Brent Crude traded down 0.39% to $80.75.
Goldman Sachs Forecasts on Oil Prices and Demand
The Goldman Sachs head of oil research noted that crude oil production in the US had soared exponentially in the last twelve months. Struyven said production jumped to 12.7 million barrels per day over the past year. Following the significant rise, the researcher now looks forward to a slower growth movement for the rest of the year. While he refers to the decline in rig counts, he said the bank forecasts US crude oil production to drop to just 200 barrels per day. The US oil rig count typically helps indicate drilling activity and future output.
Meanwhile, the count recently fell to its lowest level in 16 months. The active oil rigs in the United States declined from its late 2022 record by 15%. Per a report by Baker Hughes, US oil rigs dropped by 7 to 530- the lowest level since March 2022.
Furthermore, the G20 Energy Ministers met last weekend in India to “share and collaborate in accelerating clean, sustainable, just, affordable, and inclusive energy transitions, as a means of enabling secure, sustainable, equitable, shared and inclusive growth”. However, the group dismissed without reaching a consensus on the approach to transit to clean energy. The Goldman Sachs executive said the G20 Energy Ministers’ failure to agree on a decision suggests “very substantial” uncertainty about long-term oil demand.
“Key point here for investors is, with the uncertainty about oil demand being so elevated, investors may require a premium to compensate for the elevated risk from such elevated demand uncertainty.”
Still on oil demand, the International Energy Agency said in June that global oil demand was on track to surge by 2.4 million barrels per day in 2023.