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

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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.

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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.

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