Goldman Sachs has increased its forecast for Brent crude oil prices in the second quarter of 2019 by 11% to $72.50 (£55.52) per barrel amid the “shock and awe” of OPEC output cuts and US sanctions on Iran and Venezuela.
The investment bank’s latest report predicts prices will average $66 (£50.54) per barrel over the course of the year, up from its previous estimate of $62.50 (£47.86), after they hit a five-month high of $70.69 (£54.15) on 8 April.
It also expects the Brent forward curve to shift further into backwardation, and anticipates the global oil market will remain in a supply-deficit of roughly 0.5 million barrels per day in Q2 of this year.
“Oil prices have ground higher over the past month, with Brent now trading above $70 [£53.61] per barrel and at its highest level since November,” read its forecast.
“We view current prices and the 28% Brent rally this year as fundamentally driven and justified, reflecting a global market deficit that has been larger than even we had expected, achieved through backwardation and despite only modest speculative sponsorship.
“While the macro risk-on environment and the threat of disruptions may drive spot prices even higher, we still expect that prices will decline gradually from this summer as shale and OPEC production increases.”
Goldman Sachs oil prices forecast comes days after they hit a five-month high
Oil prices reached a fresh high in 2019 on April 8 and their highest level since November last year following heightening tensions in the Libya conflict.
After rising above $70 (£53.6) for the first time last week, Brent crude soared a further 0.5% to reach $70.69 (£54.15) per barrel in morning trading in Asia on Monday, in tandem with various OPEC cuts.
US West Texas Intermediate (WTI) crude also increased by 0.5%, making for a rise of 30 cents to $63.39 (£48.56) per barrel.
Output reductions in OPEC countries Iran and Venezuela, both of which have recently been hammered by sanctions, are thought to have also contributed to the rise.
Hussein Sayed, chief market strategist at FXTM, said: “OPEC’s ongoing supply cuts and US sanctions on Iran and Venezuela have been the major driver of prices throughout this year.
“However, the latest boost was received from an escalation of fighting in Libya which is threatening further supply disruption.
“If output from Libya is reduced significantly in the upcoming days and OPEC does not act, we may see a further five to 10% surge in prices over the next two weeks.”
