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Goldman Sachs on energy outlook, oil at $100 possible


Truck passes the pumpjacks of Belridge Oil Field on November 03th, 2021 close to McKittrick (California).

Mario Tama | Getty Images News | Getty Images

Goldman Sachs expects that oil demand will reach a new peak in 2022. This prediction is repeated in 2023.

The head of energy research at the bank, Damien Courvalin said that $100 per barrel oil was possible.

The oil demand reached new records before the latest Omicron variant was introduced. He also stated that air travel will continue to grow.

Courvalin told reporters Friday that the new variant has already been in high demand. “The global economy continues to grow and we are adding more jet demand,” Courvalin explained during an energy outlook briefing. It is clear that we’ll have a record demand of 2022 and then again in 2023.

Both international benchmark Brent crude and U.S. crude prices have spiked above $80 in recent months as post-pandemic demand outstrips supply. Surging natural gas prices have also caused crises around the world, most notably in Europe.

The omicron variant has dampened sentiment, however, pushing prices back to just above $70 in recent weeks.

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Meanwhile, Courvalin expects restrictions that were hurting air travel to ease.

Air travel has been slow to recover, in part because of Asia, he said. “Until very recently, countries like Australia, New Zealand Singapore, were very aggressive on limiting international transfer. That’s easing,” he said.

“We’ll have to wait for this wave to pass but that suggests that international travel should recover further next year,” he said, predicting that oil prices will be at $85 per barrel for 2022, with an upside risk that prices could go $5 to $10 higher.

Oil at $110?

Courvalin said he would not rule out the possibility of oil prices hitting $100,And there are “two paths” that could lead to that.

One reason is the fact that oil companies are increasing production, which causes costs to rise. “There is inflation everywhere in the economy. And eventually, there will be inflation in oil services,” said he.

Another possibility would be if oil supplies are not sufficient to meet demand when global economies recover from pandemic.

Courvalin claimed that oil prices could reach $110 when there’s demand destruction to slow down the market. He said that it was “quite possible”.

Already there were concerns about high oil prices sending the market toward demand destructionThis is when the demand plummets for a short time due to a prolonged period of high prices.

OPEC+ — which is made up of Organization of the Petroleum Exporting Countries, and its allies including Russia — have said they could meet earlier than their planned Jan. 4 meeting if changes in the demand outlook warrant a review, Reuters reported. According to Reuters, OPEC+ intends to provide an additional 400,000 barrels of oil per day for January.