Saudi-UAE deal to be a bullish catalyst for oil, says Goldman

Saudi-UAE deal to be a bullish catalyst for oil, says Goldman

Bengaluru: Goldman Sachs expects an oil supply agreement between Saudi Arabia and the United Arab Emirates to be a bullish catalyst for prices over coming months as the U.S. investment bank maintained its summer Brent price forecast at $80 per barrel.

Saudi Arabia and the UAE have reached a compromise over OPEC+ policy, an OPEC+ source told Reuters on Wednesday, in a move that should unlock a deal to supply more crude to a tight oil market.

“Such an agreement would help bridge the (modest) divide between both countries and help remove the (low probability) OPEC+ tail risks of a potential price war or insufficient production growth,” the bank said in a note on Wednesday.

“We believe that risks to our bullish oil price forecasts are skewed to the upside, with the catalyst for such a move higher shifting from the demand to the supply side.”

Goldman expects $2 to $4 per barrel upside risk to its $80 per barrel summer forecast and $75 per barrel for its 2022 Brent price forecast.

The bank also noted that a lack of an Iran nuclear deal would increase its 2022 price forecast by $10/bbl.

Iran and global powers have been negotiating since April to lift sanctions on Tehran, which have hit its economy hard by cutting its vital oil exports.

Brent futures slipped 0.6 per cent to $74.32 a barrel on Thursday, while U.S. West Texas Intermediate crude was trading around $72.61.

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