Why does Goldman believe that oil prices will be $80 this summer when they have plummeted?

At a time when oil prices plummeted, Goldman Sachs remained optimistic that OPEC+ production cuts would offset weak demand in Europe and increased production in Iran.

Goldman Sachs also raised the target price of Brent crude to $80 a barrel from $65 a barrel, suggesting there is still 26 per cent room for oil prices to rise as global demand for crude oil recovers.

There is still a huge supply gap in the global oil market.

On the supply side, Goldman Sachs said that even if Iran increases production, there is still a supply gap of 2.5 million barrels per day in the global crude oil market.

Goldman Sachs estimates that Iran's crude oil exports have increased by 700000 barrels per day since February.

At the same time, there are signs of weakness in the spot crude oil market. Goldman Sachs said the weakness in the spot market was mainly affected by higher-than-normal seasonal maintenance rates at US refineries and rolling trading in crude oil storage and transportation. This has further heightened concerns about a slowdown in global demand.

The epidemic situation in EU affects the growth prospect of crude oil demand in the second quarter.

On the demand side, Goldman Sachs believes that the current outbreak in Europe has caused the market to worry about the actual demand for crude oil in the second quarter of this year.

Goldman Sachs said oil prices had fallen back to where they were before the OPEC+ meeting. From an emotional point of view, the current crude oil price level reflects the market's concern about the impact of the novel coronavirus epidemic in Europe on crude oil demand. Factors such as a stronger dollar and speculative unwinding of trading positions exacerbated the market's decline.

Goldman Sachs calculates that OPEC+ 's production cuts will offset market disruptions from Europe and Iran, given that there is no sign that shale oil production in the United States has recovered.

In terms of OPEC+ production, Goldman Sachs expects OPEC+ to return to production of 2.8 million b / d by August, a month later than the bank had expected.

But Goldman's production forecast was much higher than OPEC and IEA had expected. Goldman Sachs explains that the main difference is that it has higher expectations for future crude oil demand, while some oil-producing countries have cut production by 50% in the past year.

Goldman Sachs said there was actually a buying opportunity in the current decline in the crude oil market. With the gradual acceleration of vaccination in Europe and the United States, global demand for crude oil will increase sharply in the coming months. Higher immunization coverage will boost demand for crude oil in the aviation industry. The US infrastructure stimulus package will also boost the base of crude oil demand, which Goldman Sachs expects to reach 300000 barrels a day.