Is Oil Heading to 80 USD?
The big oil rally seems to be far from over, and the WTI (West Texas Intermediate) benchmark rose above 67.50 USD on Monday for the first time since October 2018.
Offshore oil and gas development is set to recover from the shock that prices and demand went through due to the pandemic. It’s also set for a new record in project commitments in the five years leading up to 2025, according to Rystad Energy. This news was well-received by oil companies last week.
Additionally, oil operators are expected to commit to developing a record number of offshore oil and gas projects over the next five years.
According to the Goldman Sachs correlation analysis, based on daily charts, oil and copper are among the best-performing assets during inflation times. Oil is up hundreds of percent from its April lows when the price went negative for a day.
Earlier in the month, Goldman raised its Brent crude forecast by 5 USD per barrel to 75 USD for the second quarter of 2021, then pushed it further to 80 USD for the third quarter.
Last Thursday, OPEC (Organization of the Petroleum Exporting Countries) started another rally in oil price after the decision to keep output quotas unchanged in April. This happened despite market expectations for supply to notch up to meet demand, as the world progresses in COVID-19 vaccination campaigns.
It looks like oil could hit the 70 USD level sooner than later, especially if central banks and governments continue to flood the markets with liquidity. Therefore, Goldman’s 80 USD target is looking pretty realistic this year.
On the downside, the first stronger support is seen at February highs of 63.50 USD for WTI, with the other demand zone most likely at around 60 USD.