 "Goldman Sachs | Photo: Bloomberg")
(Reuters) - Goldman Sachs on Tuesday reduced its forecast for Brent crude oil to $75 a barrel for the third quarter, $5 lower than its previous estimate, as a surge in Delta variant COVID-19 cases takes a toll on demand.
Oil prices fell $5 a barrel on Monday in response to fears over the hit to demand from rising Delta coronavirus infections and an OPEC+ agreement to boost output.
"Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ slower production ramp-up," Goldman said.
The bank now projects a third-quarter deficit of 1.5 million bpd versus 1.9 million bpd forecast previously.
Goldman expects Brent oil prices to average $80 per barrel in the fourth quarter from its previous forecast of $75 and sees a deficit of 1.7 million bpd in the final quarter of this year.
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"The oil market repricing to a higher equilibrium is far from over, with the bullish impulse shifting from the demand to the supply side," the bank said.
Even if vaccinations fail to curb hospitalisation rates, which could drive a longer slump to demand, the decline would be offset by lower OPEC+ and U.S. shale output given current prices, Goldman added.
"Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains," it said.
Goldman also said progress on a U.S.-Iran nuclear deal has stalled leading to increased risks that the potential ramp-up in Iran exports is later than its October base-case.
(Reporting by Nakul Iyer and Swati Verma in Bengaluru. Editing by Jane Merriman)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
