Goldman Sachs: Saudi-UAE Deal to be a Bullish Catalyst For Oil

Goldman Sachs expected that an agreement between Saudi Arabia and the UAE regarding oil supplies would be a catalyst for a rise in prices in the coming months, as the American investment bank kept its Brent price forecast in the summer at $80 a barrel.

An OPEC + source told Reuters yesterday, Wednesday, that Saudi Arabia and the UAE had reached a settlement on the OPEC + policy, in a step that would pave the way for an agreement to increase crude supplies in a tight oil market, which was denied by the UAE Ministry of Energy.

Goldman Sachs forecasts an upside potential of between $2 and $4 per barrel for its summer forecast of $80 per barrel, and $75 per barrel for its 2022 Brent price forecast.

The bank also indicated that the absence of an Iranian nuclear deal would raise its price forecast in 2022 by $10 a barrel.

Iran and world powers have been negotiating since April to lift sanctions on Tehran, which have badly damaged its economy by slashing its crucial oil exports.

Brent crude futures fell 0.6% to $74.32 a barrel on Thursday, while US West Texas Intermediate crude reached $72.61.

“Such an agreement would help bridge the (modest) divide between both countries and help remove the (low probability) OPEC+ tail risks of a potential price war or insufficient production growth,”

“We believe that risks to our bullish oil price forecasts are skewed to the upside, with the catalyst for such a move higher shifting from the demand to the supply side.”