Caixin Shanghai, March 21 (Editing by Huang Junzhi)Goldman Sachs has cut its oil price forecast for this year, saying the collapse of Silicon Valley Bank earlier this month triggered an ongoing banking crisis and increased the risk of a recession.
Goldman analysts now expect oil prices to be around $94 a barrel over the next 12 months. While that implies a potential 39 percent gain from current levels, the new forecast is lower than Goldman's previous $100 a barrel forecast.It also means that international oil prices may not cross the $100 mark this year.
This time last year, shortly after the conflict between Russia and Ukraine broke out, Goldman Sachs set an oil price target as high as $140 a barrel as investors worried about a potential supply shock. But Russian exports have proved resilient, with a milder than expected winter also reducing demand. Oil prices are down about 50 percent from a March 2022 high of $130 a barrel.
Goldman Sachs notes thatContinued banking stress, recession fears and significant investor outflows should weigh on oil prices.
"Historically, after such shocking events, positioning and prices recover only gradually, especially in the long run," the Goldman team, led by Daan Struyven, wrote in a new report. Our adjustment also reflects some weaker fundamentals, namely higher short-term inventories than expected, a slight decline in demand and a slight rise in non-OPEC supply."
Goldman said the failure of Silicon Valley Bank could lead to slower economic growth as the banking industry could impose stricter lending standards in the future. Oil prices have fallen 15% since the banking crisis began.
On the other hand, it didn't help that a top Biden adviser said the administration was in no hurry to replenish the Strategic Petroleum Reserve. Some investors expected the replenishment of the SPR to be a floor for oil prices this year, but so far that has not been the case.
The SPR currently holds 371.6 million barrels of oil, the lowest level since the 1980s and about 43 percent less than in 2020.
Overall, though, Goldman does see upside potential for oil prices, as recession fears may be overblown, meaning future demand for oil will be higher than many expect.
"Our economists remain convinced that given the relatively high capital buffers in the U.S. and European banking systems and continued policy support...The oil market may have become too pessimistic about near-term growth prospects. In most cases, oil prices should recover this year." "The report said.
Recommended use China IT News APP
Download flyfish app to read news