Oil at $100 a barrel cannot be ruled out in 2023 as supply additions are expected to be too slow to keep up with record demand, according to Goldman Sachs Group.
While the bank’s base forecast is for Brent to stay around $85 next year and 2023, it could breach triple digits through either higher cost inflation for drillers, or if an unexpected supply shortfall forces prices to spike high enough to destroy demand, said Damien Courvalin, head of energy research.
The upside risks underscore why Goldman remains bullish on oil even after prices have rallied more than 40 per cent this year. The bank sees the recent sell-off as overdone on unnecessary concerns about Omicron-related restrictions and expects investors to buy the dip once asset managers reallocate money next year.
“There’s insufficient supply in the face of strong demand,” Mr Courvalin said in a call with reporters on Friday. “Oil prices have to be higher to overcome the higher cost of capital to fund projects.”
The recent $10 dip is the equivalent of pricing in a loss of five million barrels a day of demand for three months. That’s likely an overreaction, Mr Courvalin said, as governments seem to be responding to omicron with more testing than new lockdowns so far.
Longer term, output growth is being hit by challenges, including upstream cost inflation and more expensive financing as investors opt to support ESG-focused sectors, he said. Investments in long-cycle oil projects have also dipped due to uncertainties around energy transition and its impact on fuel usage.
There’s insufficient supply in the face of strong demand. Oil prices have to be higher to overcome the higher cost of capital to fund projects
Damien Courvalin,
head of energy research at Goldman Sachs
Demand for everything from gasoline, diesel and plastics is currently at a record level, with consumption expected to reach new highs in 2022 and 2023, he said. Use of jet fuel will continue to lag due to Covid-related travel restrictions, but some pent-up demand for travel is likely to emerge as borders reopen.
Demand is being supported by strong government capital expenditure, both to support the economic recovery from Covid-19 and to fund the energy transition needed to combat climate change. An increased focus on income inequality will also support commodities, as poorer people tend to spend a higher portion of their income on goods and energy.
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
UAE currency: the story behind the money in your pockets
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Biography
Favourite Meal: Chicken Caesar salad
Hobbies: Travelling, going to the gym
Inspiration: Father, who was a captain in the UAE army
Favourite read: Rich Dad Poor Dad by Robert Kiyosaki and Sharon Lechter
Favourite film: The Founder, about the establishment of McDonald's
Killing of Qassem Suleimani
'Dark Waters'
Directed by: Todd Haynes
Starring: Mark Ruffalo, Anne Hathaway, William Jackson Harper
Rating: ****
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Earth under attack: Cosmic impacts throughout history
- 4.5 billion years ago: Mars-sized object smashes into the newly-formed Earth, creating debris that coalesces to form the Moon
- 66 million years ago: 10km-wide asteroid crashes into the Gulf of Mexico, wiping out over 70 per cent of living species – including the dinosaurs.
- 50,000 years ago: 50m-wide iron meteor crashes in Arizona with the violence of 10 megatonne hydrogen bomb, creating the famous 1.2km-wide Barringer Crater
- 1490: Meteor storm over Shansi Province, north-east China when large stones “fell like rain”, reportedly leading to thousands of deaths.
- 1908: 100-metre meteor from the Taurid Complex explodes near the Tunguska river in Siberia with the force of 1,000 Hiroshima-type bombs, devastating 2,000 square kilometres of forest.
- 1998: Comet Shoemaker-Levy 9 breaks apart and crashes into Jupiter in series of impacts that would have annihilated life on Earth.
-2013: 10,000-tonne meteor burns up over the southern Urals region of Russia, releasing a pressure blast and flash that left over 1600 people injured.
