Oil prices could reach $95 if Iran doesn’t return to the market this year, while commodities overall are set for a supercycle that could potentially last a decade, according to Goldman Sachs, which is “extremely bullish” on the whole commodity complex.
Currently, we are seeing record dislocations in energy markets, metals markets, and agriculture markets, Jeff Currie, global head of commodities research at Goldman Sachs, told Bloomberg Television in an interview on Thursday.
There is still a lot of money in the system, while investment positions in commodities are very low, which is setting the stage for further upsides in oil prices and the prices of other commodities, Currie said.
“The best place to be right now, particularly given the Fed pivot, are commodities,” Goldman Sachs’s global head of commodities told Bloomberg.
“We think you’re going to see another year of out-performance of commodities and real assets more broadly,” Currie added.
Goldman Sachs basically reiterates its core thesis from October 2020: this is the beginning of a supercycle in commodities that could last up to a decade, he said.
Specifically referring to oil, Goldman’s head of commodities is also very bullish due to low investment in the sector and the fact that only two oil producers in the world—Saudi Arabia and the United Arab Emirates (UAE)—currently have the capacity and the means to pump more oil than they did in January 2020, just before COVID. Everyone else is struggling, Currie said.
“This market has the potential to get very tight going over the course of next 3-6 months,” he added.
Goldman’s call for Brent Crude prices for the first quarter of 2022 is $85 per barrel, assuming that Iran could legitimately return to the market later this year. But an Iranian return now looks increasingly unlikely, and without Iranian exports, we could be looking at $95 oil, according to Currie.
Last month, Goldman Sachs forecast crude oil prices could hit $100 in 2023 as demand growth outpaces supply growth.