Crude oil price: how viable is Goldman Sachs’ forecast

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 Aug 18, 2021
  • Crude oil price remains below $70 after API's report showed a lesser-than-expected draw of US oil stockpile.
  • With the ongoing concerns over the aggressive Delta variant, focus is now on EIA's data.
  • It will be interesting to see if Goldman Sachs' forecast of $75 in Q3'21 still holds.

Crude oil price remains below the crucial level of $70 after the US stockpile data. The focus is now on EIA’s data.

crude oil price

US oil inventory data

Late on Tuesday, the American Petroleum Institute (API) indicated that US oil inventory had dropped by 1.163 million barrels for the week ending on 13th August. While the draw is higher than the prior week’s 0.816 million barrels, it missed the experts’ estimates of -1.259 million.

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Investors are now keen on whether EIA’s data, which is scheduled for release on Wednesday afternoon, will confirm the trend. While demand optimism continues to buoy crude oil price above first quarter’s low of around $50, the aggressive Delta variant has triggered concerns over the same.

Goldman Sach’s forecast

With the current volatility in the oil market, investors are keen on whether Goldman Sachs’ forecast will hold. The bank’s analysts have maintained that the current decline is temporary. In mid-July, it predicted that the Delta variant will only lower demand for a few months by about 1 million bpd.

By further pegging their bullish stance on the effectiveness of vaccine programs in different nations, it forecasted that Brent oil will hit $80 in the year’s second half. However, it has since adjusted its short-term forecast to $75 in Q3’21 and $80 in Q4’21.  

Brent oil technical outlook

Crude oil price remains on a downtrend, as has been the case since early July. It remains below the crucial level of 70 after extending Monday’s losses. At the time of writing, the benchmark for global oil -Brent futures – was down by 0.65% at 69.11.

Since the beginning of August, the price has dropped by about 8.36%. Notably, 70 has been a crucial level in the current month as the tug of war continues between demand optimism and concerns over the Delta variant.

On a three-hour chart, it is trading below the 25 and 50-day exponential moving averages. In the near term, crude oil price is likely to continue finding resistance at 70. Brent oil will probably trade sideways at around 69 ahead of EIA’s data on Wednesday afternoon.

As a reaction to the data, the price may drop further to the month’s low of 67.59. On the flip side, if the bulls manage to break the resistance at 70, the next target will be at 71.55.

crude oil price
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