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The 2023 pandemic has had a massive impact on the whole world. As a result, Goldman Sachs has decreased their oil forecast.
2020in New York City, the novel coronavirus (Covid-19) epidemic causes severe impacts on the global economy.
Because of this, Goldman Sachs is lowering its expectations for oil the future.
Jeffrey Currie who works for Goldman and is Head of Commodities has stated that the demand losses are unprecedented. 8 million gallons of oil less is used on a daily basis at the moment. This is due to the virus’s outbreak and the halt of traveling.
Now, Jeffrey Currie, the head of commodities research at Goldman, said the decrease in demand is “unprecedented.
About eight million barrels less of oil are used each day, the effect of widespread shutdowns caused by the coronavirus and enforced on humans through travel restrictions.
The U.S. West Texas Intermediate crude and Brent crude are at an average of $20 per barrel in Q2. Over the past few weeks Goldman has decreased the forecasted values a couple of times.
After the breakdown in OPEC the organization had lowered the values to $29 for WTI and to $30 for Brent.
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Goldman’s expectation of oil rates has dropped twice after April due to US oil.
Prices are in negative times. At the beginning of the month, Goldman’s prediction for the WTI rate in 2020 was US$ 29 a barrel, and for the Brent rate was expected to be US$ 30 a barrel.
WTI has already dropped by 53% in 2023 and as for Brent – it is also below target by 33%. Since 2023, the US WTI benchmark index has fallen by 53%, while the European Brent standard index has also fallen by nearly a third.
On April 1 the current OPEC+ production cuts expire, so Saudi Arabia and Russia prepare to increase their oil production.
On April 1st, the cooperation framework between Saudi Arabia, Russia, Kuwait and Syria will expire, and these countries are expected to launch oil production and price war again.
The COVID-19 outbreak has aided the price war which has been going on between OPEC and its allies. Currie also analyzes that the pandemic which has led to a drop in demand and the mentioned price war is connected. The strategy of OPEC+ just has an additional impact on the already smaller demand.
With the increase of the cases of Covid-19, the international oil production and price war between OPEC, Russia and other countries have become more serious.
The forecast in oil economists, Currie, has made a compliation regarding the spreading of the disease impact and the mentioned oil war, and stated that controlling that the pandemics will have negative impacts on oil demands and at the same time, OPEC and our allies’ discussion on oil production volumes will make that worse.
The estimations regarding the impact of COVID-19 will likely turn out to have been too optimistic – commodities and equity markets might actually drop even more. The Q1 has also been changed recently from 0,7% to 0.
On International Monetary Fund (IMF) that is, an organization needed for economic international cooperation and global currency reserve, have sent countries financial aid because of Covid-19, yet on April 14 it announces that the current forecasting of the global economy growth rates on 2023 are 0.9%, which is 0.3% smaller from that of the first quarter.
Meanwhile, the first quarter forecasting of the growth of world’s financial market dropped from 7% to zero.
Meanwhile, for the stock market, Goldman researchers said the decline could be too optimistic, indicating that the decline could spread to other markets. The Q1 has also been changed recently from 0,7% to 0.
According to Currie, the forecast could look pessimistic compared to current investor sentiment, but it appears that companies might have “underpriced” the possible length of the disease and the impact it will have on earnings. Equities might be able to recover rather quickly, but the same cannot be predicted for oil. The latter will need more time to get back to normal after the pandemic. It is believed, however, that those lower prices will lead to a beneficial re-balancing of the market in the long term.
It’s not just about leaving investors confident for the moment, Currie said it is possible that the market is less prior to the actual human suffering and the duration of disease can bring to the US economy. He indicated that the recovery of the US economy will lag behind that of the stock market and said that the recovery of oil price offsets the growth for the stock market. Analysts also said that because the market is very interested in the use of renewable energy and electric cars in the future, if the current low cost is continuing on, it can also affect the profitability of these investments.
Goldman Slashes Forecast Of Oil
Goldman Sachs recently made a dramatic announcement that they have slashed the price forecast of oil drastically. This comes as the global economy continues its efforts to recover from the effects of the coronavirus. Oil prices have been some of the hardest hit globally with prices falling to their lowest levels in history as world demand wanes.
This announcement from Goldman Sachs cut their 2021 forecast for Brent crude to be around $50 dollars a barrel. This is a drastic decrease from the earlier forecast just last month of $65 a barrel. This dramatic slash in the forecast is concerning for many as the world awaits a recovery from the pandemic.
What factor led to Goldman Sachs slashing their oil price forecast?
Goldman Sachs said the major factor leading them to slashing the forecast was due to a slower-than-expected recovery in oil demand from the coronavirus crisis. Due to a rise in cases, many countries have reimposed lockdowns or stay-at-home orders meaning the economy is re-contracting. This has had a significant impact on oil demand.
What effect will the Goldman Sachs forecast have on global oil prices?
The Goldman Sachs forecast has added to the bearish sentiment in the market, sending oil prices lower. Prices of Brent crude have tumbled to around $42 a barrel, their lowest level since June 2020. With slow demand, the supply of oil in the market has continued to remain high, making it difficult for prices to move higher.
Are there any benefits from the Goldman Sachs forecast?
Although there are concerns due to the Goldman Sachs forecast, there is some silver lining for consumers and businesses. The forecast is for significantly lower oil prices for 2021 and this could lead to a drop in prices at the pumps, providing some relief for those that depend on oil-based commodities.
Summary
Goldman Sachs recently made a drastic announcement that they have slashed the price forecast of oil drastically due to a slow-than-expected recovery in oil demand due to the coronavirus crisis. This onslaught of bearish sentiment has sent oil prices to their lowest levels since June 2020 and could lead to a drop in prices at the pumps for consumers. The key factor causing a slowdown in the recovery of oil prices is the global economic climate and any improvement in these circumstances could lead to a reversal of this trend.