Crude oil is the true reopening play – Goldman Sachs’ Jeff Currie

Crude oil price remains on a rebound after plunging below the once steady support zone of $80 per barrel at the beginning of the year. However, it eased on Thursday with Brent futures dropping by 0.36% to trade at $82.59 as at the time of writing.

Notably, Goldman Sachs remains highly bullish on energy prices and the broader commodities class.  According to the bank, China’s reopening and subsequent strengthening of its economy will likely boost Brent oil prices to $110 per barrel by Q3.

crude oil price
crude oil price

Goldman Sachs outlook on commodities

In late 2020, Goldman Sachs predicted that commodities would be subject to a supercycle that would last for about a decade. Granted, a strong US dollar weighed on most of these financial assets in 2022. Besides, COVID-19 restrictions and a slowdown in the global economic growth had Brent crude oil price plunge by about 45% in a span of ten months.

However, as 2023 unfolds, the investment bank remains bullish on commodities. In particular, it expects the key measure of commodity prices movements – S&P GSCI Total Return Index to surge by 43% in 2023. The bullish thesis is founded on its expectation of supply shortage. Nonetheless, it acknowledges that economic weakness in China and the US may be bump in Q1’23.

Crude oil price outlook

Based on an interview conducted on Bloomberg on Wednesday, Goldman Sachs’ global head of commodities, Jeff Currie forecast a big bounce in crude oil price over the next few weeks post the Chinese’s Lunar New Year.

With optimism over China’s reopening being a major bullish driver of crude oil price, Currie expects Brent oil to hit $90 in the first quarter of 2023. He further states that as the reopening gains momentum and more air planes fly in and out of China, the figures will likely rise to $95 and $110 in Q2 and Q3 respectively.

To further substantiate this forecast, Currie asserts that in addition to the reversal of China’s zero COVID policy, growth impulse will further boost crude oil price. This includes stimulus into the country’s property market and the subsequent recovery of the Chinese economy.

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