Brent Oil Climbs Back Above $63 With Goldman Seeing More Gains

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Brent Oil Climbs Back Above $63 With Goldman Seeing More Gains

Elizabeth Low

(Bloomberg) -- Brent oil resumed gains as the market assessed the fallout from the big freeze across Texas, with Goldman Sachs Group Inc. predicting prices will advance into the $70s in coming months.

Futures in London rose back above $63 a barrel on Monday after faltering at the end of last week as U.S. production started to resume following an easing of temperatures. A robust recovery from the Covid-19 outbreak had pushed prices to the highest level in over a year last week and Goldman sees the rally accelerating as demand outpaces supply from OPEC+, shale and Iran.

Saudi Arabia and Russia, meanwhile, are heading toward an OPEC+ meeting next week with differing opinions about adding more supply to the market in April. The kingdom wants to holds output steady, according to delegates, but Moscow is indicating that it still wants to proceed with a supply increase.

Oil has gained more than 20% this year after a pledge from Saudi Arabia last month to deepen production cuts turbo-charged a rally triggered by Covid-19 vaccine breakthroughs. Brent’s prompt timespread has firmed in a bullish backwardation structure, signaling a tighter market and helping to unwind stockpiles built up during the pandemic.

Oil prices are likely to see increased volatility over the next week as the market gets more clarity on how quickly U.S. refining capacity will return and as the OPEC+ gathering nears, said Warren Patterson, head of commodities strategy at ING Bank NV.

Goldman raised its price estimates and is now predicting Brent will reach $70 a barrel in the second quarter and $75 in the third quarter, $10 above its previous forecasts, according to a note. The rally will be driven by lower inventories and higher marginal costs to restart upstream activity.

See also: Lost in the Snowstorm, What Can Kill This Oil Surge?: Julian Lee

Iran, meanwhile, said the U.S. must first return to the 2015 nuclear deal and lift sanctions if it wants talks, with the Islamic Republic set to restrict some access to its nuclear sites from Tuesday. Another OPEC producer -- Iraq -- decided to halt its prepayment deal for oil with a Chinese company after prices rose, Iraq’s oil minister said in an interview with BBC Arabic.

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