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As oil prices dropped on the shock of a surge in Delta variant around the globe, Goldman Sachs has reduced its forecast for Brent crude in the third quarter by $5, to $75 per barrel.

Oil prices had fallen by $5 per barrel on Monday on a surge in the prevalence of new Delta variant coronavirus cases at a time when OPEC+ agreed to ramp up production by 400,000 bpd starting in August and another 400,000 bpd in every month thereafter until the production cut is entirely wound down.

The fear is that a resurgence of coronavirus cases could trigger more restrictive measures and slow economic recovery, and hence oil demand.

“Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ slower production ramp-up,” Goldman said.

Now, Goldman is projecting a Q3 deficit of 1,5 million bpd, compared to the 1.9 million bpd estimate that it had previously forecast.

But it’s not all gloom and doom for oil prices.

For the fourth quarter, Goldman is forecasting $80 per barrel Brent, compared to its earlier forecast of $75 per barrel, with a 1.7 million bpd deficit in Q4 this year.

Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains,” Goldman said.

By Julianne Geiger for Oilprice.com


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