In spite of record low oil prices seen in recent weeks, Goldman Sachs say oil prices will recover by next year.
On Monday oil prices dropped, losing gains made last week as markets were affected by worries that a global oversupply would continue. Demand from around the world has slumped amid the coronavirus pandemic which has forced the shutdown of many economies around the world. Ongoing trade tensions between the US and China are expected to hinder global economic recovery even as some countries begin to ease lockdown restrictions.
Michael McCarthy, chief market strategist at CMC Markets believes optimism around global growth prospects is waning and oil is going giving up the gains made last week.
On Monday the US dollar strengthened against a range of other currencies. As oil is priced in US dollars, when the greenback strengthens, this makes the commodity more costly for buyers trading in other currencies.
Goldman Sachs, Irvine Humphries Global maintain oil prices optimism
But equities analysts at Goldman Sachs and Irvine Humphries Global remain bullish on oil’s prospects for next year.
Goldman Sachs increased its predictions for Brent crude prices for 2021 from $52.50 to $55.63, also hiking its estimate for US West Texas Intermediate from $48.50 to $51.38.
With demand beginning to recover as China’s economy slowly restarts, Goldman Sachs analysts say oil production has begun to decline quickly due to a reduction of activity and OPEC production cuts.
Although Goldman Sachs does not anticipate a big jump in oil prices in the coming weeks, it is fairly optimistic about oil’s growth prospects in 2021.