Goldman Sachs's Jeff Currie says oil could top $80 by year-end

Published Fri, Sep 3 20215:04 AM EDT

Goldman Sachs' Global Head of Commodities Research Jeff Currie expects international oil benchmark Brent Crude to hit $80 per barrel by the end of the year, and said it could even exceed that if the right combination of factors falls into place. OPEC and its allies, known as OPEC+, on Wednesday ratified an agreement for the world's largest oil producing countries to hike production by 400,000 barrels a day from October, as oil demand recovers from its pandemic-induced slump. The organization and its allies, including Russia, are in the process of scaling back unprecedented output cuts implemented during the height of the Covid-19 crisis. However, a host of uncertainties could yet affect the oil price, according to Goldman Sachs' Currie, not least the impact of Hurricane Ida in the U.S. "When we look at the magnitude of 400,000 barrels a day increase, I want to put it in context of what is going on with the Ida hurricane in the U.S. that has knocked out 1.5 million barrels per day of production," Currie told CNBC's "Squawk Box Europe" on Thursday. "Every eight days that disruption goes on wipes out a month's increase from OPEC. I think that that really underscores how tight this market really is, and when we look at the market globally, it is currently in a deficit of around 1.5 million barrels per day." OPEC's goal is to gradually unwind a substantial inventory surplus built up during the pandemic by September, and Currie suggested it is still on track to normalizing inventories, but there could yet be demand shocks along the way. "The weakness in demand from the delta [Covid] variant was not as bad as most people thought it could have been going back six weeks ago, which means that this market will get tighter going into the autumn, so we maintain our $80 a barrel forecast going into Q4," he added. On Friday morning, Brent crude was trading just under $73 per barrel, while U.S. West Texas Intermediate (WTI) was hovering around $70. Currie suggested that the oil market is going to transition from being supply-driven to demand-driven. Much of the recovery in global economic activity has played out and oil demand is nearing pre-Covid levels, but there are growing concerns about supply, he argued. The key questions, he said, are whether Iran will agree a deal with the U.S. to lift sanctions on the Islamic Republic's oil exports, and whether there is an uptick in U.S. drilling. "Those are the two main sources of supply that were supposed to provide this market with the ability to grow going into year-end," Currie said, adding that both now looked unlikely. But he added: "Demand's still there, market's likely to get tighter, which means there is even upside risk to our $80 a barrel targets." The Iran Problem Johannes Benigni, chairman of JBC Energy Group which advises the energy industry, told CNBC on Thursday that OPEC+ was "in control" when it comes to keeping oil prices stable at between $65 and $75 per barrel, but that a possible U.S. military confrontation with Iran could yet cause a "significant spike" in prices. He said a deal between the two nations looked increasingly unlikely , since Iran is already close to having weapons-grade materials, according to the International Atomic Energy Agency. Should Washington and Tehran strike a deal, however, he added that the market could see more barrels coming out of Iran, which he suggested OPEC would be able to manage. "OPEC+ is in control and they will add as many barrels as the market needs. If they are concerned that demand is not robust, they will always keep that a little bit on the short side to ensure the prices have no reason to collapse," Benigni said. "The market looks stable as of now."

Oil barells in a row

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