Due to the peak season for travel and the demand for energy to cope with the heat, global oil prices are expected to rise again this summer, according to a series of reports released by many on Wall Street. And Goldman Sachs, who never forgets to make unexpected predictions, is undoubtedly one of the representatives.

Daan Struyven, head of oil research at Goldman Sachs, predicts in the latest report released on Sunday that Brent crude will rise to $86 per barrel in the third quarter of this year, an increase of nearly 7% from the current level.

Struyven wrote in the report, "We expect healthy consumer groups and strong summer demand for transportation and refrigeration equipment to drive an important supply and demand situation in the crude oil market in the third quarter." Struyven and his team expect the Brent oil price to rise to $86 per barrel in the third quarter and maintain the fluctuation range forecast of $75 to $90 per barrel.

During the Asian session on Tuesday, Brent crude oil was trading near $81.44, while US WTI crude oil was slightly higher at $77.65 per barrel. Overnight, the prices of these two major crude oil futures rose by about 3%, reaching the highest level in nearly a week.

It is worth mentioning that Goldman Sachs' above prediction has obviously undergone a more optimistic change compared to its view a week ago. A week ago, when OPEC+ ministerial-level meeting agreed to extend its production cuts policy until 2025, but gradually cancel voluntary additional production cuts from the end of September. Goldman Sachs believed at that time that the result of this meeting was bearish market, and Brent crude oil might fall below the range of $75-90 per barrel.

However, now Goldman Sachs has shown a more bullish attitude towards the future prospects of the oil market.

Goldman Sachs strategist said in the report, "We still think $75 per barrel will be the bottom line for Brent crude oil. The actual demand for crude oil, including demand from major economies, often rises when prices fall."

Buying needs are emerging.

In the United States, the Biden administration has planned to purchase an additional 6 million barrels of oil to supplement the US strategic oil reserves, using the favorable opportunity of falling oil prices to supplement the heavily consumed strategic inventory. The US Department of Energy announced two strategic oil reserve tenders on Friday, delivering 1.5 million barrels in September and another 4.5 million barrels in October, November, and December.

US Energy Secretary Granholm said that with the maintenance work of the two sites coming to an end, the United States may increase the replenishment speed of strategic oil reserves; work related to strategic oil reserves (SPR) will be completed by the end of the year. The US government hopes to refill the oil reserve at $79 per barrel or less.

Hiroyuki Kikukawa, president of NS Trading, a platform under Nissan Securities, said, "The market expects the rise in fuel demand this summer, and if the WTI price stays below $79 per barrel, the United States will increase strategic reserves, which supports the oil market. As WTI crude oil approaches its 200-day moving average level, we expect oil prices to remain near current levels for a period of time."

In addition to Goldman Sachs, analysts from JPMorgan also stated last week that the recent decline in oil prices is likely to be temporary.

Natasha Kaneva, global head of commodities strategy at JPMorgan, wrote in a report last Thursday, "The reduction of summer inventory should be enough to bring Brent oil back to the high range of $80-90 per barrel in September."

On the supply side, a senior figure in the US energy sector recently stated that unless the number of drilling rigs increases, US crude oil production will fall by about 1 million barrels per day by the second half of 2025.

Adam Rich, deputy chief investment officer of Vaughan Nelson, an investment management company based in Houston, said that more drilling rigs will be needed to offset the decline in productivity of existing oil wells.

"We may be able to maintain a level of 12 to 13 million barrels per day for six to nine months, but if we don't see the number of drilling rigs really start to rise, that will be a big problem," he said in an interview.

In recent years, the prosperity of shale gas has driven US oil production to surpass that of other countries in the world, but growth is expected to slow down next. because the most abundant oil and gas resources have been drilled and many US producers are now promising moderate growth and prioritizing shareholder returns. In the wave of consolidation in the US industry, the number of active US drilling rigs has fallen to the lowest level since January 2022.

Rich pointed out that oil prices need to be close to $90 per barrel to push up the number of drilling rigs.

June 11, Caixin - The summer of this year is expected to see a further rise in global oil prices due to the peak travel season and energy demand for cooling relief. This is the latest forecast made in a series of reports released by many on Wall Street. And Goldman Sachs, which never forgets to make unexpected predictions, is undoubtedly one of the representatives.

Editor/Somer