After yesterday’s oil collapse, everyone’s curious about what happens next.Here’s the word from Goldman’s Energy Weekly:
While a large portion of the risk premium likely came out of prices yesterday, we remain wary of the potential for further downside in coming days. The sell-off yesterday (May 5) has likely removed a large portion of the risk premium that we believe has been embedded in oil prices, which could suggest further downside may be limited from here. However, we remain wary of potential further downside should economic data releases in coming days continue to disappoint, with the focus now turning to today’s (May 6) Non-farm payroll report in the United States.
We continue to see fundamentals tightening over the course of this year, likely pushing prices back to recent highs by next year It is nevertheless important to reiterate that while we saw recent prices as having risen above the levels consistent with underlying near-term supply-demand fundamentals, we continue to believe that the oil supply- demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan oil supplies remain off the market. Consequently, it is important to emphasise that even as oil prices are pulling back from their recent highs, we expect them to return to or surpass the recent highs by next year.
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