Oil Prices Can Rise to $90, Goldman Sachs Says. Here’s Why.

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Goldman Sachs has raised its oil price forecast to $90 a barrel as it said Hurricane Ida should prove to be “the most bullish hurricane in U.S. history.”

The bank’s analysts said the hurricane, which has hit oil output, has more than offset the ramp-up in OPEC+ production since July. They added that the global oil supply-demand deficit is larger than they expected, with the recovery in demand from the Delta coronavirus variant’s impact faster than anticipated.

“Global oil demand is back to converging to pre-Covid levels led by mobility in Asia, including China, and with the Delta Covid impact fading,” they said, adding that the global decline in air travel was smaller than first feared.

Add to that the developing global gas shortage, which has seen natural-gas prices soar in Europe and around the world, and they see winter demand “now squarely skewed to the upside.”

The

Goldman Sachs (ticker: GS) analysts raised their year-end Brent crude forecast to $90 a barrel from $80, also raising their West Texas Intermediate crude price to $87 from $77. When it comes to risks to that forecast, a new vaccine-busting variant could hit demand, while a more aggressive production rise from the Organization of the Petroleum Exporting Countries and its allies when they meet next week would “soften but not derail” Goldman’s projections.

Oil prices surged to three-year highs early on Monday as fears mounted over global energy shortages. Brent crude futures climbed 1.2% to $78.14, while West Texas Intermediate crude futures rose 1.1% to $74.81.

China’s own power shortages have come into focus as production at a number of factories, including some

Apple (AAPL) and

Tesla (TSLA) suppliers, has been halted.

Nomura and

China International Capital Corp have both downgraded their Chinese growth forecasts, while

Morgan Stanley said that if production cuts continued for the rest of the year it would shave one percentage point off gross domestic product growth in the fourth quarter.

Write to Callum Keown at callum.keown@dowjones.com