Oil Prices Will Remain High For Years To Come
- A growing number of major investment banks are turning bullish on oil in the medium to long term.
- A lack of investment is leading to supply deficits as demand rebounds to pre-COVID levels.
- Rebounding consumption and tight supply could push oil prices even higher.
Six years after former BP chief executive Bob Dudley said that “the industry needs to prepare for lower for longer,” a growing number of major investment banks now expect “higher for longer” oil prices.
Rebounding global oil consumption amid tight supply—contrary to some forecasts last year that indicate demand may have peaked or was close to its peak—as well as years of underinvestment in new supply following the 2015 crash, have prompted Wall Street banks to raise significantly their projections for oil prices in the short and medium term.
Oil prices have hit multi-year highs in recent days, with WTI Crude at its highest since 2014 and Brent Crude at the highest level since October 2018.
Even after the latest rally, prices still have headroom to rise further, many major investment banks believe.
Goldman Sachs, for example, sees Brent hitting $90 per barrel at the end of this year, up from $80 expected earlier. The key driver of Goldman’s higher forecast is global oil demand recovery amid still a weaker supply response from non-OPEC+ oil producers.
The investment bank also sees sustained higher oil prices in the coming years.
Fundamentals warrant higher oil prices, and the bank’s forecast for the next several years is $85 a barrel, Damien Courvalin, Head of Energy Research & Senior Commodity Strategist at Goldman Sachs, told CNBC earlier this month.
Oil demand will set record highs next year and the year after that, and we need to see a ramp-up in investment, he said.
“We’re facing potential multi-year deficits and the risk of significantly higher prices,” Courvalin told CNBC.
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