ASX 200 energy shares are surging, crude oil to hit US$90/b by year end: analyst

Oil could make a run for 7-year highs according to Goldman Sachs

| More on:
a man in a business suit looks at a map of the world above a line up of oil barrels with a red arrow heading upwards above them, indicting rising oil prices.

Image source: Getty Images

ASX 200 energy shares continue to gather momentum following a bullish outlook for oil prices.

Brent oil has rallied almost 10% in September, currently trading at 23-month highs of US$79.05 a barrel.

The S&P/ASX Energy (INDEXASX: XEJ) index has rallied for 6 consecutive sessions, adding 13.8% to a 3-month high.

ASX 200 heavyweights including Woodside Petroleum Ltd (ASX: WPL), Santos Ltd (ASX: STO) and Oil Search Ltd (ASX: OSH) are posting solid gains across the board, up 4.13%, 4.9% and 5.35% respectively on Tuesday.

Goldman forecasts oil to reach US$90/b by year end

Goldman Sachs raised its forecast for oil from US$80/lb to US$90/lb, according to Reuters.

In a note from 26 September, Goldman said:

While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts.

From a supply perspective, the broker pointed to Hurricane Ida as a major blow to global supply with its impact “more than offset[ing] OPEC+’s production ramp-up since July.”

In terms of demand, Goldman said that risks were “squarely skewed to the upside in the winter, as a global gas shortage will increase oil-fired power generation”.

This also comes at a time where oil sentiment could receive a further boost as the United States has its eyes set on relaxing air travel restrictions for vaccinated foreign passengers in November.

Goldman acknowledged the Delta variant could pose a risk to demand and that an “aggressively faster ramp-up in OPEC+ production” could soften its projected deficit.

As a result, Goldman lowered its 2022 forecasts for the second and fourth quarter from US$85/b to US$80/b.

What does this mean for ASX 200 energy shares?

ASX 200 energy shares have been quick to re-rate with many charts going vertical in the past two weeks.

Despite benchmark oil prices trading at almost 2-year highs, most ASX 200 energy shares have lagged, trading well below pre-COVID levels.

For shareholders, the commentary from Goldman Sachs is encouraging and could continue to support the comeback narrative taking place for the energy industry.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers