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Soaring gas prices, colder winter could boost oil prices, says Goldman

Goldman Sachs (NYSE:GS) said that with the surge in global gas prices, a colder winter in Europe and Asia could in turn boost demand for oil, driving a $5 per barrel upside risk to its fourth quarter 2021 Brent price forecast of $80 a barrel.

A global surge in wholesale power and gas prices has prompted concerns of high winter energy bills and shortages, having already forced some energy supplies out of business in Britain.

A colder winter could lead to a 900,000 barrels per day (bpd) increase in oil demand, the Wall Street bank said in a note dated Sept. 19.

“The tightness in global gas supplies creates a clear and potentially meaningful bullish catalyst for the oil market this winter, larger than the downside risk to global oil demand from another Delta-like COVID wave,” Goldman added.

The investment bank said that for oil prices to cross the $80 a barrel threshold, prices at the Dutch TTF hub and JKM would have to trade at $23.5 and $25.5/mmBtu respectively.

Prices at the TTF hub and JKM are currently trading at $24/mmBtu and $25/mmBtu, respectively.

Brent crude futures were trading at $74.29 a barrel at 0844 GMT and U.S. West Texas Intermediate (WTI) crude futures were at $70.70 barrel.

Bank of America (NYSE:BAC) Global Research said recently it could bring forward its $100 per barrel oil price target to the next six months from mid-2022 if the winter is colder than usual, while Barclays (LON:BARC) expects low stocks in Europe and strong demand for LNG in Asia, suggesting higher gas prices are here to stay over winter months.
Source: Reuters

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