Goldman Sachs: commodities’ rally has ‘nothing to do’ with Fed policy

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Jun 22, 2021
  • According to Goldman Sachs’ Jeff Currie, commodities' bullish thesis is based on rising demand and low supply.
  • Goldman Sachs expects crude oil price to reach $80 per barrel in Q3’21.
  • Investors are keen on the weekly US inventory data from API and EIA on Tuesday and Wednesday respectively.

Crude oil price remains on an uptrend as Goldman Sachs maintains a bullish outlook on commodities. During an interview on CNBC’s Squawk Box, the bank’s global head of commodities research, Jeff Currie said,

“…the bullish thesis on commodities has nothing to do with inflation risk, nothing to do with Fed’s forward guidance. What it has to do with is scarcity in supply and strong physical, and that hasn’t changed.”

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The economist was addressing the concern that the ongoing commodity rallying has hit its peak after last week’s massive selloff. However, he noted that the commodities that saw a decline in price, including corn and soybeans, are those that are more sensitive to the price movement of the US dollar. Goldman Sachs expects crude oil price to reach $80 per barrel in Q3’21.

US oil inventory data

Jeff Currie’s remarks come at a time when investors’ focus is on the weekly US oil inventory figures. Late on Tuesday, the American Petroleum Institute (API) is set to release its stockpile numbers for the week ending on 18th June.

In the past release, the institute noted that the amount of oil in storage had declined by 8.537 million barrels as the summer travel season gains momentum. The figure was significantly better than the expected draw of 3.000 million barrels and the prior reading of -2.108 million barrels. Besides, it was the highest stockpile decline since September 2020.

After the API data, investors will be keen on whether EIA confirms the trend in its Wednesday release. Analysts expect a lesser draw of 3.625 million barrels after the agency indicated that the oil inventory has dropped by 7.355 million barrels in the previous release. Lower-than-expected readings will be a bullish catalyst for crude oil price as it signals a rise in demand.

WTI oil technical outlook

Crude oil price has pulled back after surging to its highest price since October 2018 at 73.99. At the time of writing, WTI futures were down by 0.41% at 72.73. On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. Besides, the formation of an ascending trendline highlighted in black hints at further gains. For as long as the prices remain above the trendline, the bullish outlook remains.

I expect crude oil price to continue finding support at 72.50 ahead of the weekly oil inventory data. Bullish figures are likely to trigger a further rise past Monday’s high to 74. Above that level, the bulls will be targeting 75. On the flip side, bearish data may push the benchmark of US oil to 71.46, which is along the 50-day EMA and the ascending trendline.

crude oil price
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