Oil’s rebound to levels last seen before Covid-19 wreaked havoc on the global economy has been driven by Saudi Arabia’s unilateral output cuts together with the improving demand outlook. The rally has also been supported by investors using crude to position for a reflationary environment, Goldman said. Brent oil traded above $63 a barrel on Monday and is up around 22% this year.
Supply will keep lagging behind demand for several reasons, the bank said:
- OPEC+ will fall behind the market rebalancing, especially as the pace of global drawdowns of stockpiles has accelerated
- There are no signs of more activity from most non-OPEC+ producers outside of North America, creating a risk supply will fall 900,000 barrels a day short of the bank’s estimates in the coming year
- The U.S. earnings season confirms that big explorers and producers, the key drivers of U.S. shale output, remain focused on returning cash to shareholders
- Indications from the U.S. government suggest Iranian output likely won’t increase in the short term