By Senad Karaahmetovic

Damien Courvalin of Goldman Sachs believes that oil prices will continue to rise in summer, as structural shortages remain unresolved.

Courvalin advised clients in a note that the oil price will rise further to increase supply to maintain normal levels.

A strategist pointed out that April’s oil market was tighter than he expected, given China’s decline in production and China lockdowns.

“Supply remains inelastic to higher prices with core-OPEC (higher) and exempt countries (lower) production shifts broadly offsetting. According to the demand side of the equation, current low prices are not enough to offset the global negative growth trend. As a result, we believe oil prices need to rally further to normalize the unsustainably low levels of global oil inventories, as well as OPEC and refining spare capacities,” Courvalin said in a client note.

Courvalin estimates that prices should average $135/bbl by the end of this year’s second half and in the first year of 2023, respectively, for inventory levels to normalize before 2023. From $125, the Brent price is expected to rise to $140 in Q3.

“This represents summer retail prices reaching levels normally associated with $160/bbl crude prices (due to strong refining utilization, gas prices and USD) to achieve the additional 0.5 mb/d of price-induced demand destruction required to rebalance the market next year in addition to (1) global GDP growth exc. China slowing to 2% yoy, (2) record output from Saudi/UAE/Iraq and (3) Iran/Venezuela/Libya production rising 1.3 mb/d.”

In this vein, Goldman Sachs’ (NYSE:) commodity analyst Neil Mehta increased price targets for Super Majors in response to a rising oil outlook.

An analyst reiterated his positive stance regarding ConocoPhillips’ (NYSE 🙂 and ExxonMobil’s (NYSE :). The new price targets for COP/XOM have been set at $140.00 and $117.00 respectively, compared to $130.00 or $104.00 before.