Forex Flash: Oil-market structurally stable – Goldman Sachs

According to the Economics Research Team at Goldman Sachs, “We see the oil-market as structurally stable and expect long-dated Brent prices to be well anchored around USD $90/bbl due to the supply response to the high prices we have seen in recent years. However, cyclically the market remains tight, and recently demand especially in non-OECD countries has surprised to the upside while global inventory estimates have been revised downwards.”

Moreover, “We see the recent rise in prices as being more reflective of rising demand than supply-side shocks, and would not expect a sharp rally in Brent prices from here in the absence of further supply shocks.” That said, the developments have shifted risks to the upside for our 3-month USD $110/bbl Brent target, and we expect cyclical tightness to continue to support high roll yields this year.” the team adds.

High roll yields are also available in soybeans and we expect this to become the case in copper later this year as well. Going forward, we expect the roll yield to contribute a larger share of the return from commodity investments than was the case in the years when long-dated prices were rising structurally. This would be in line with the experience from the 1990’s when we last saw stable long-dated commodity prices.