Oil futures posted a loss of more than 6% this week, the largest since October, but analysts at Goldman Sachs suggested that prices are merely taking a break from a big rally in crude that’s set to continue.
The recent oil-price pullback is only a “transient halt in an otherwise large oil price rally and a compelling buying opportunity,” analysts at Goldman Sachs wrote in a note dated Thursday.
“ The recent oil-price pullback is only a “transient halt in an otherwise large oil price rally and a compelling buying opportunity.” ”
For the week, front-month contract prices for U.S. benchmark West Texas Intermediate crude CLJ21,
Renewed lockdowns in Europe and safety concerns surrounding the AstraZeneca COVID-19 vaccine led to worries about a slowdown in energy demand, pulling WTI and Brent oil prices on Thursday to their lowest settlements in more than two weeks.
Read: Finland suspends use of AstraZeneca shots despite backing by EU regulator this week
In a note dated Thursday, analysts at Goldman Sachs, said the move for oil prices reflects, in part, “concerns over [European Union] vaccinations and COVID cases as well as a softening physical oil market,” exacerbated by U.S. dollar strength and the unwind of recently added speculative length.
Despite the large losses, Goldman Sachs still forecasts a “rapid oil market rebalancing in coming months.”
The oil market has remained in a large deficit of 2.5 million barrels per day since February, even as Iran exports have climbed by an estimated 700,000 barrels per day year to date, the analysts said.
While EU demand and Iran supply headwinds would slow the second quarter market rebalancing by 750,000 barrels per day, the analysts expect that the productions cuts by the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, “will offset these given no signs of higher shale activity” and OPEC+’s “pursuit of a tight oil market.”
The Goldman Sachs analysts said they now forecast OPEC+ to increase output by 2.8 million barrels per day by August, posing a “modest downside risk” for prices.
Still, they see “meaningfully higher prices” ahead, with their Brent forecast rising from $65 in March to $80 this summer, as “demand indicators” in areas of high vaccination providing comfort for their “above consensus expectations.”
