Commodity prices have been behaving irrationally, according to a Goldman Sachs Group Inc. GS analyst, citing further unsustainable price increases.
The Goldman Sachs Analysts: The analysts at Goldman Sachs originally issued a price target of $125 per barrel of oil in three months and $120 per barrel in 12 months, due to a combination of higher demand and low supply (h/t Wall Street Journal).
That was down from the previous price target of $140 per barrel in the third quarter and $130 per barrel by the end of 2022.
Goldman Sachs head of energy research Damien Courvalin now expects a price target of $130 per barrel of Brent crude oil by the end of the year.
Key Takeaways: Courvalin told Bloomberg News that demand for oil will increase from here as there still remains a deficit in oil supply.
Compared to last winter, oil demand was at one million barrels of oil per day, and is expected to reach 1.5 million barrels of oil this year.
As power markets and industrial companies in Europe switch from natural gas to oil due to limited supply, there will be more upside risk to oil and diesel prices as we head into the winter season, Courvalin explains.
The declining gas price trend is over and, in order to solve the market deficit, retail gas prices could reach $5 dollars per gallon by year-end, he added.
Also, Goldman projects modest Chinese demand by the end of the year as they begin to reopen. If China reverts back to peak oil demand, this could add $15 dollars per barrel based on the firm's pricing model.
Meanwhile, tensions between Russia and NATO could ramp up global oil supply issues, since European countries rely on Russian oil.
Crude Oil Price Action: Earlier Friday, Crude Oil fell 2.10% to $92.36 per barrel.
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