Crude oil price outlook as Goldman Sachs maintains Q4’21 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 Nov 23, 2021
  • Crude oil price has remained below the crucial level of $80 for over a week now.
  • Demand concerns have heightened amid the rising cases of COVID-19 in Europe.
  • Goldman Sachs has maintained its Q4'21 forecast despite talks on SPR releases.

Crude oil price has remained below $80 amid the ongoing concerns over SPR releases from various consumers. Nonetheless, Goldman Sachs has maintained its forecast for Q4’21.

crude oil price
crude oil price

Goldman Sachs forecast

In the recent past, investors have been skeptical about Goldman Sachs’ forecast that Brent futures will average at $85 per barrel in Q4’21. However, the investment bank has maintained its stand. It has indicated that the recorded decline in crude oil price is unjustified by fundamentals.

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The oil market has been subject to heightened volatility in November. After hitting a three-year high of 86.71 in mid-October, Brent futures have since dropped by about 8.86%. For about a week now, the benchmark for global oil has been trading below the previously-steady support zone of $80. At the same time, WTI futures have been below the psychological level of $80 for a week now. This is after dropping from a 7-year high of $85.42 in late October.

The recorded decline in crude oil price is a reaction to the new coronavirus wave that has hit Europe. Subsequently, Austria has enacted a national lockdown that will last for 10 days but could be extended by a further 10 days. Other European countries such as Belgium and Germany have introduced stringent measures to curb the soaring COVID-19 cases.

At the same time, talks over the probable release of oil from strategic petroleum reserves by various consumers has exerted pressure on crude oil price. In fact, Biden’s administration is preparing to announce the release. Japan, China, and India are considering a similar move.

According to Citigroup, the released amount may range between 100 million and 120 million barrels or higher. However, Goldman Sachs is of the opinion that the market had already priced in the SPR releases. As such, it has termed the drop in oil prices as “excessive”.

To counter the expected release of crude oil by the aforementioned customers, OPEC+ may adjust its plan to gradually increase production. In its November meeting, the alliance maintained its output cuts despite pressure from the US and other consumers.  With the ongoing supply concerns, investors are highly anticipating the OPEC+ meeting that is scheduled for 2nd December.

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