The oil market analysis. Goldman Sachs expects $80 for Brent
- Results of previous trading July Brent crude futures: $68.46 (+3.04%)
- June WTI crude futures: $66.05 (+3.88%)
- The spread between current Brent and WTI contracts is about $3.4 in favor of Brent.
In the details, oil prices continued to recover on Monday amid declining optimism about the Iran nuclear deal, as well as positive forecasts from Goldman Sachs.
Last week, the price declined for three days in a row after statements from several senior officials from different countries that Iran and the United States had made progress in negotiations. This week, US Secretary of State Anthony Blinken made his comments.
"What we haven't seen yet is whether Iran is ready and willing to do what it has to do. We do not have an answer to this question yet," Blinken said, sowing a seed of doubt in market participants about the imminent lifting of sanctions against Iran. According to the Secretary of State, at the current stage, the countries managed to clarify what actions each of the parties should take to return to the 2015 deal.
However, a number of practical issues remain to be resolved. Iran, for its part, on Monday extended the agreement on the monitoring of nuclear facilities with the IAEA, which expired a day earlier. This was stated by both organizations.
The agreement is extended until June 24. Before the US unilateral withdrawal from the nuclear deal in 2018. Iran produced about 3.8 million b/d and exported about 2 million b/d. After the resumption of sanctions, production fell almost twice. As the Biden administration came to power, Iran began to gradually restore production, appreciating its chances of success in the negotiations. At the moment, production in the country, according to Reuters, is 2.5 million b/d, which means the potential for increasing production of about 1.3 million b/d, or about 1.3% of total global consumption.
Investment bank Goldman Sachs maintains a strong bullish view on oil, despite the threat of growth in Iranian exports. According to the bank's analysts, the market underestimates the potential for demand recovery even in this scenario. Experts note that the OPEC+ countries can compensate for any increase in production from Iran by reducing production.
The bank expects $80 per barrel of Brent in the fourth quarter due to a jump in demand, which will be driven by the opening of global economies on the background of vaccination. Global oil demand may grow by 4.6 million b/d by the end of the year, with most of the increase, according to the bank, occurring in the next 3 months.
Brent futures recovered most of last week's decline and closed Monday trading at around $68.5 per barrel. The quotes were in the same trading range where they spent most of May. The view of the instrument remains neutral. This week, the next round of US-Iranian talks will take place. If the parties reach an agreement, this may negatively affect oil prices and lead to a re-descent to the area of $66 per barrel.
Late this evening, the API will publish preliminary estimates of oil reserves in the United States. In the morning, Brent futures are trading 0.3% higher than the previous day's closing level.