WTI Crude Hits $80, Notches Best Day In Over 2 Months: 'Peak Oil Demand Still A Decade Away'

Zinger Key Points
  • WTI crude climbed 2% to $80 a barrel on Tuesday, while Brent crude rose 1.7% to $84 a barrel.
  • The price surge is due to increased demand anticipation and ongoing supply constraints.

Oil prices had their strongest session in over two months Tuesday, with West Texas Intermediate (WTI) light crude climbing 2% to $80 a barrel, and Brent crude rising 1.7% to $84 a barrel.

The surge in prices is attributed to the anticipation of increased demand with the start of the driving season and ongoing supply constraints. The market expects that OPEC+ will maintain its voluntary output cuts of 2.2 million barrels per day into the second half of the year during its upcoming June 2 meeting.

The United States Oil Fund USO, which tracks the WTI price, rose 3%, factoring in Monday’s oil performance while U.S. markets were closed for Memorial Day.

Energy stocks also rallied, with the Energy Select Sector SPDR Fund XLE up 1%, outperforming all other S&P 500 sectors.

Chart: WTI Rebounds To $80, Breaking April-May Downtrend

Goldman Sachs Raises Long-Term Oil Demand Outlook

Goldman Sachs has revised its long-term global crude demand forecast upward, projecting continued growth until 2034, after which it expects oil consumption to plateau.

“Peak oil demand is still a decade away,” Goldman analysts said in a report. Goldman Sachs now forecasts global oil demand to reach 108.5 million barrels per day (mb/d) by 2030, up from a previous estimate of 106 mb/d. The firm predicts peak demand around 2034 at approximately 110 mb/d, followed by a flat trend to 2040.

“Our view is more bullish than the IEA, which assessed that oil demand peaks before 2030,” Goldman Sachs said.

The investment bank foresees a potential scenario where oil demand could even rise to about 113 mb/d by 2040, driven by a slower transition to electric vehicles.

“The EV market is facing a few headwinds,” analysts said.

“EV subsidies are being cut in several European markets, and continued price competition has led to profit pressure for OEMs and a slower pace of new EV investments. Our Auto team thinks our EV slow-adoption scenario, which predicts a pause this year in EV sales penetration increase, has become more realistic.”

Goldman Sachs said capital expenditure on crude oil production is slowing, contributing to medium-term supply constraints across the oil value chain.

Goldman Sachs named 23 Buy- and Sell-rated stocks across the energy sector to reflect its long-term views on the oil market.

Goldman Sachs’ Energy-Stock Strategies

Upstream/Integrated Exposure

Theme 1: Own FCF Leaders

Goldman Sachs highlights Buy-rated Shell plc SHEL, Petrobras PBR, CNOOC Ltd., Cenovus Energy CVE, and Canadian Natural Resources Ltd. CNQ as free cash flow leaders.

Sell-rated ONGC has weaker FCF due to limited production growth.

Theme 2: Own Growth Assets

The firm points to Buy-rated ENI S.p.A. E, ConocoPhillips COP, and Devon Energy Corp. DVN as companies with significant growth assets, citing successful exploration and shale oil access as key opportunities.

Theme 3: Own Profitable Projects

Goldman Sachs identifies Buy-rated PTTEP, Santos Ltd. SSLZY, and Chevron Corp. CVX as leaders based on the profitability of their projects.

Refining Exposure

Theme 1: Own Exposure to Refining Market Tightness

The investment bank recommends Buy-rated Thai Oil Public Co. TOIPF, S-Oil, Reliance Industries, and Repsol S.A. REPYY for their high exposure to middle distillates. It also favors Buy-rated HF Sinclair Corp. DINO, Marathon Petroleum Corp. MPC, and Phillips 66 PSX as beneficiaries of broader refining margin strength.

Theme 2: Own Biofuel Leaders

Goldman Sachs highlights Buy-rated Neste Oyj NTOIY and Calumet Specialty Products Partners L.P. CLMT for their exposure to sustainable aviation fuel.

Theme 3: Avoid Demanding Valuation

The firm is Sell-rated on Indian Oil Corp. and HelleniQ Energy Holdings S.A. HLPMF, citing high valuations and weaker FCF generation.

Read now: US Stocks Waver, Nvidia Lifts Chipmakers, GameStop Spikes, Moderna Tumbles: What’s Driving Markets Tuesday?

Photo via Shutterstock.

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