Goldman Sachs expects an oil supply agreement between Saudi Arabia and the United Arab Emirates to be a bullish catalyst for prices over coming months as the U.S. investment bank maintained its summer Brent price forecast at $80 per barrel.
Saudi Arabia and the UAE have reached a compromise over OPEC+ policy, an OPEC+ source told Reuters on Wednesday, in a move that should unlock a deal to supply more crude to a tight oil market.
“Such an agreement would help bridge the (modest) divide between both countries and help remove the (low probability) OPEC+ tail risks of a potential price war or insufficient production growth,” the bank said in a note on Wednesday.
“We believe that risks to our bullish oil price forecasts are skewed to the upside, with the catalyst for such a move higher shifting from the demand to the supply side.”
Goldman expects $2 to $4 per barrel upside risk to its $80 per barrel summer forecast and $75 per barrel for its 2022 Brent price forecast.
The bank also noted that a lack of an Iran nuclear deal would increase its 2022 price forecast by $10/bbl.
Iran and global powers have been negotiating since April to lift sanctions on Tehran, which have hit its economy hard by cutting its vital oil exports.
Brent futures slipped 0.6% to $74.32 a barrel on Thursday, while U.S. West Texas Intermediate crude was trading around $72.61.