Fuel prices may continue remain elevated for the rest of the current year. Goldman Sachs predicted the Brent crude prices to hit $140/bbl during the July-September period in the spot market. The investment bank, however, said that the crude prices are likely to come down to $130/bbl in the October-December period and remain at that level in the first six months of 2023.
“Updating our supply and demand expectations, we now forecast that Brent prices will need to average $135/bbl in 2H22-1H23 (up $10/bbl vs. prior forecast) for inventories to finally normalise by late 2023, the binding constraint to prices in our view,” Goldman Sachs said in its latest report. On Thursday, Brent crude futures for August went up to $123.28/bbl and the Indian basket at $118.06/bbl. India meets around 80% of its fossil fuel needs through imports.
However, “this politically created surplus” is already ending, driven by the ongoing recovery in Chinese demand, with an 0.5 mb/d expected further decline in Russian production following the European ban. “Based on our estimated 3% demand elasticity and bottom-up estimated shale elasticity, as well as accounting for the retail vs Brent price disconnect, we forecast that oil prices will need to average $135/bbl in 2H22 and $125/bbl in 2023, $10/bbl higher than previously… ,” GoldmanSachs said.
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