Investment bank Goldman Sachs (GS) forecasts that oil will reach $100 U.S. a barrel as demand reaches new highs in 2022 and 2023.
Damien Courvalin, Goldman Sachs’ head of energy research, said in a note to clients that oil at $100 U.S. per barrel is a definite possibility given that demand was already at record levels before the Omicron variant arrived, and demand for air travel should continue to recover over the next year.
Both international benchmark Brent crude and U.S. crude prices had spiked above $80 U.S. per barrel in recent months as post-pandemic demand outstrips supply. Surging natural gas prices have also caused crises around the world, notably in Europe.
The Omicron variant has dampened sentiment, however, pushing prices back to just above $70 U.S. a barrel in recent weeks.
Goldman Sachs expects pandemic restrictions that were hurting air travel to ease over the next year, which will help oil demand further strengthen.
“We’ll have to wait for this wave to pass but that suggests that international travel should recover further next year,” wrote Courvalin, predicting that oil prices will be at $85 U.S. per barrel for 2022, with an upside risk that prices could go $5 U.S. to $10 U.S. higher.
Courvalin stressed that oil prices could go as high as $110 U.S. as demand destruction occurs. That’s “quite conceivable,” he wrote.
There had already been concerns over high oil prices sending the market toward demand destruction, which occurs when demand plunges during a brief period caused by a sustained period of high prices.
OPEC+ — which is made up of Organization of the Petroleum Exporting Countries, and its allies including Russia — have said they will meet earlier than their planned January 4 meeting if changes in the demand outlook warrant an immediate review.
OPEC+ has plans to add another 400,000 barrels of oil per day of supply in January.