Goldman Sachs Group: if it is cold enough this winter, the oil price will rise above 90 US dollars.

Goldman Sachs Group said that the shortage of natural gas supply, coupled with the risk of cold weather, increased demand for oil, oil prices will rise further, the price of more than 90 US dollars per barrel.

Jeff Currie, global head of commodities at Goldman Sachs Group, said in an interview with Bloomberg that if the winter is colder than usual, oil prices could accelerate in the near future, soaring to $90 a barrel.

Goldman Sachs Group report pointed out that the tightening of natural gas supply in Europe has led to rising prices, setting a new record. Goldman Sachs Group raised his price forecast by 10 US dollars. The high price of natural gas for a long time has not only brought disastrous consequences to European power suppliers, but also increased the demand for alternative oil.

At the same time, Hurricane Ida and Tropical Storm Nicholas caused severe damage along the Gulf Coast of the United States, slow recovery of crude oil production, and still 40% of production capacity has not been restored.

The demand for oil as a substitute for natural gas has increased, while the supply has been reduced due to the weather, which has pushed up oil prices further. Brent crude futures rose 1.4 per cent to $75.39 yesterday afternoon, up 46 per cent so far this year.

Currie further said that due to the surge in natural gas demand and rising prices, the rise in natural gas prices shows no sign of abating, especially outside the United States.

According to Goldman Sachs Group, global natural gas prices have soared and inventories are still at a relatively low level before the peak of winter demand. In order to avoid power shortage, oil and other fuel alternatives can be exploited to generate electricity. Goldman Sachs Group's report shows that oil can indeed alleviate the problem of natural gas shortage. For example, in Europe and Asia, 600000 barrels per day is used for industrial purposes (in refining and petrochemical) oil burning generates roughly the same amount of electricity as 2.5 Bcf/d of natural gas. When the weather is colder, more oil will be used for heating, and the amount of oil used by residents will increase, and the total oil demand is expected to reach 900000 barrels per day in March next year.

Although it is feasible to use oil instead of natural gas to generate electricity, it will have a certain impact on oil prices. Goldman Sachs Group raised his original forecast for Brent crude by $80 a barrel by $5.

Goldman Sachs Group predicts that if natural gas prices rise further, oil demand will increase, reaching 1.35 million barrels per day for power generation and 600000 barrels per day for industry in Asia and Europe. The oil market will not be able to absorb such a huge increase in demand, leading to a surge in oil prices and undermining the relationship between oil supply and demand, which will be the ultimate result of solving the natural gas shortage.

In addition, the inventory of petroleum products has been below average, crude oil and power generation facilities are also subject to certain restrictions, power peak regulation plan to intermittently alleviate the use of natural gas, but the inventory has not yet increased, oil instead of natural gas power generation plan will face challenges. As the weather gets colder, oil and gas prices will continue to rise.

This suggests that oil and gas prices will be subject to the risk of cold weather, such as the rebound in JKM (Japan-Korea Mark LNG) to $32 per million British thermal units in January.

Goldman Sachs Group said that the tight global natural gas supply is a major catalyst for the bullish oil market this winter. Moderate substitution of oil for natural gas for power generation has a favorable impact on fuel oil and liquefied petroleum gas (LPG) markets.

Source: Wall Street