In 2021, oil prices will be mainly supported by the forthcoming huge economic stimulus package in the US coupled with the low possibility of a lot of Iranian oil returning to the world market, according to Goldman Sachs.
President Joe Biden’s proposed $1.9-trillion COVID relief package might stimulate the American economy. Eventually, the US oil demand will rise by almost 200,000 barrels per day (bpd) in 2021 and 2022, as highlighted by Reuters.
Goldman Sachs has been quite bullish on oil since the end of 2020, predicting that Brent Crude will average $65 in 2021.
Apart from a growing economy in the United States in 2021, the bank believes that the matter with the Iranian nuclear deal will not get resolved any time soon. The Trump Administration imposed severe sanctions on Iran’s oil exports in 2018, seeking to cut off the oil sales of the Iranian government, after the US withdrew from the infamous Iranian nuclear deal.
President Biden’s Policy
Nonetheless, President Biden has pledged to give Tehran a path back to diplomacy and a gradual return to the nuclear deal. That is, if Iran returns to full compliance with the agreement, set up while Biden was the Vice President To Obama.
Biden’s first talks with the foreign leaders and allies will feature Iran and the current US sanctions as highlighted by White House Press Secretary Jen Psaki. This means that the lifting of sanctions on Iran is not an instant priority for the United States Administration. Goldman Sachs analysts wrote a note:
“Delays in a full return of Iran production would reinforce our bullish oil outlook since we already forecast a tight 2022 crude market with low OPEC spare capacity.”
The United States Administration’s moratorium on oil and gas leasing activities in the Arctic National Wildlife Refuge in Alaska does not mean that the oil market will tighten quickly in 2021-2022.
Also, the temporary suspension on issuance of drilling permits on federal land and waters and revocation of the Presidential Permit for the Keystone XL pipeline does not mean that the oil industry will recover faster than expected this year, according to Goldman Sachs. But, the firm remains bullish on the oil market in the belief that recovery will eventually come.