Goldman Sachs Raises Oil Forecast as Supply Tails off

Goldman Sachs raised on Friday its forecast for the second quarter and full year of global benchmark Brent crude oil futures, citing rapid decline in supply and improvement in demand, following gradual lockdown easing.

The multinational investment bank turned bullish on Brent price for Q2 2020 to $ 25 a barrel from $ 20 previously, up 25%. It also raised its full year forecast to $ 35.8 a barrel from $ 35.2.

After the Brent crude averaged $ 64.16 a barrel in 2019, Goldman's revised forecast at $ 35.80 for this year, which still represents a drop of nearly 44%.

“It now looks likely that the market is passing its storage capacity test, due to improved fundamentals, new creative forms of storage, and the surplus may reach 1 million barrels per day (mbpd) less than previously expected,” the bank said in a note.

Oil prices rose more than $ 26 a barrel on Friday as OPEC and its allies embarked on record production cuts to tackle oversupply due to the coronavirus crisis that was affecting the market.

Meanwhile, OPEC+ procedures of cutting production by nearly  9.7 million barrels per day began on Friday, raising oil prices by nearly 17% during the week

Finally, Goldman Sachs added that the physical oil market is still in surplus, and entry into the deficit is still a few weeks away.