Goldman sees oil price pullback as buying opportunity

Goldman Sachs sees the oil price pullback as a buying opportunity and forecasts Brent crude reaching $80 per barrel this summer even as the recent rally in prices "takes a big breather."

Oil prices are set to drop about 9% this week after growing worries about weak demand in Europe and a strengthening US dollar sent Brent futures down about 7% on Thursday.

Brent jumped above $70 a barrel on March 8 for the first time since the COVID-19 pandemic began. It was trading around $63.47 a barrel on Friday.

Despite the sharp drop in prices, Goldman expects rapid oil market rebalancing in the coming months.

The Wall Street bank said headwinds related to European Union demand and Iran supply would slow the oil market rebalancing by 0.75 million barrels per day (bpd) in the second quarter, although it expects OPEC+ will act to offset that.

The bank sees OPEC+ production increasing by 2.8 million bpd by August, well above the ramp-up in production expected by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency.

"We estimate that the oil market has remained in a large 2.5 million bpd deficit since February despite our estimate that Iran exports have increased by 0.7 million bpd year-to-date," Goldman said in a note dated March 18.

The bank expects a significant increase in global oil demand in the coming months, comforted by demand indicators in areas of high COVID-19 vaccination, with its Brent forecast rising from $65 per barrel in March to $80 per barrel this summer.

The bank said a faster pace of vaccination in the United States and greater fiscal spending create upside risks to its demand estimates.