Prices would need to rise to the forecast level for supply to normalize by late 2023, analysts at the bank said in a note dated June 6.
A “politically created surplus” led by modest decline in Russian oil exports, large releases from Strategic Petroleum Reserves and stringent COVID-led lockdowns in China was ending as Chinese demand recovers and Russian output dips further due to the EU ban, Goldman said.
European Union leaders recently agreed an embargo on Russian crude imports that will take full effect by the end of 2022, aiming to halt 90% of Russia’s crude imports into the 27-nation bloc by year-end.
The bank saw Russian production declining to 9.8 million barrels per day (bpd) by year-end from 10.8 million bpd in May, recovering slightly to 10 million bpd by December, 2023.
The market was tighter than expected through April as supply remains inelastic to the spike in prices, the Wall Street bank said.
“On the demand side, the negative global growth impulse remains insufficient to rebalance inventories at current prices. As a result, we believe oil prices need to rally further to normalize the unsustainably low levels of global oil inventories, as well as OPEC and refining spare capacities,” it added.
Oil prices were stable on Tuesday, with Brent crude futures around $119.07 barrel, as the market balanced risk sentiment with supply concerns and the prospect of higher demand as China relaxes its COVID curbs.