A Joe Biden win at next month’s U.S. elections will likely be an upward catalyst for oil prices because it will increase costs for the shale patch and will likely result in a weaker U.S. dollar, according to Goldman Sachs.
“We do not expect the upcoming U.S. elections to derail our bullish forecasts for oil and gas prices, with a Blue Wave likely to be in fact a positive catalyst,” the investment bank said a research note on Sunday, as carried by CNBC.
“Headwinds to U.S. oil and gas production would rise further under a Joe Biden administration, even if the candidate has struck a centrist tone,” Goldman’s commodity analysts say.
Biden has said he would ban new oil and gas leases on federal land and has a clean energy plan to boost the role of renewable energy in power generation and job creation.
Goldman Sachs expects a Biden Administration will tighten regulation, taxes, methane restrictions, and new drilling for the oil industry, which, as a whole, will raise the cost of U.S. shale production, leading to “shale supply headwinds.”
The regulations and taxes could raise production costs at the U.S. shale patch by as much as $5 a barrel, according to Goldman’s analysts.
In case U.S. President Donald Trump is re-elected in November, the impact of the re-election “would likely remain modest at best” because of the investor focus to shift away from fossil fuels, although the current administration’s policies favoring the oil industry will remain, Goldman said.
Last month, Goldman Sachs said it was bullish on oil, expecting the market to be in a deficit of around 3 million barrels per day (bpd) by the fourth quarter and Brent Crude prices to recover to $49 a barrel by the end of this year.
Earlier in September, Goldman Sachs forecast Brent Crude to reach $65 a barrel in the third quarter of 2021, although it could end next year lower, at $58 a barrel.
By Tsvetana Paraskova for Oilprice.com