Goldman Maintain Expectation of Supply Deficit and Higher Prices in H2

Goldman Sachs are maintaining the Brent forecast up to 95$/bbl by December and 100$/bbl by April 2024 with large deficits in H2 according to a note dated May 6.

• Rising emerging market demand is expected to drive the swing from Q1 surplus to H2 deficit averaging 1.5mbpd although with above average recession risk.
• Near-term demand fears — related to US banking stress, China industrial weakness and falling diesel margins — and financial amplification effects drove the bulk of the price decline.
• Markets seem too pessimistic compared to analysts’ consensus expectations that Brent will recover to $90/bbl in 12 months.
• Elevated oil supply from Russia and Iran and fears of limited OPEC compliance to cuts also weighed on prices although the bank sees these concerns as overblown.
• Low liquidity, the interaction of negative gamma effects in options markets and banking-stress, as well as trend-following algorithms amplified the downward price pressure from selling by investors expecting recession.