Goldman Sachs' top oil gurus lay out a completely different take from Trump on where prices should be
- President Donald Trump lashed out at OPEC on Friday, tweeting that oil prices are "artificially very high."
- Oil rose to three-year highs on Thursday, and Saudi Arabia is reportedly targeting $80 per barrel.
- In a note, commodity strategists at Goldman Sachs laid out the case for Brent crude oil hitting $80 per barrel by the end of this year.
President Donald Trump turned on the oil market in a Friday morning tweet.
"Looks like OPEC is at it again," Trump said, referring to the Organisation of Petroleum Exporting Countries, a group of mostly Middle Eastern and African oil producers that has historically influenced prices by adjusting its production.
"With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted."
Oil prices have risen by about 12% this year as OPEC and some of its allies, including Russia, stuck to their agreement to cut production. Trump's tweet came a day after oil prices rose to three-year highs, catapulted by a government report that showed US inventories were lower than average for this time of year.
And last week, Bloomberg reported that Saudi Arabia was targeting $80 oil to boost the valuation of state-owned Aramco before its initial public offering.
That also happens to be the forecast of commodity strategists at Goldman Sachs. In a note on Thursday, out before Trump tweeted, they forecast that Brent crude, the international benchmark of prices, would rise to $80 per barrel by the fourth quarter of 2018.
"We expect that global oil demand will remain strong this year and contribute to further declines in oil inventories," Damien Courvalin, Goldman's head of commodity research, said in a note on Thursday.
Brent fell by as much as 1% after Trump tweeted on Friday to $72.86 per barrel. West Texas Intermediate crude, the US benchmark, fell 0.4% to $67.94 per barrel.
As US shale oil boomed, OPEC members started up their pumps to avoid losing market share to American producers. That tug of war caused an oversupply and drove prices lower starting in 2014.
Oil has more than doubled from the lows of early 2016, when the supply glut drove prices to levels last seen during the financial crisis.
Goldman sees oil heading even higher, and China, the world's second-largest oil consumer, would be central to this increase.
According to Courvalin, the data on China's oil consumption from its National Bureau of Statistics doesn't completely cover independent refineries. Using alternative sources, they concluded that China's demand level is higher than currently estimated, which would require higher oil production to balance the market.
Both Goldman's and official estimates show a big drop in global demand growth in March. According to Courvalin, that was partly caused by heavy unusually snowfalls in Europe and the US, which reduced transportation and some economic activity.
As the weather normalizes, Goldman doesn't forecast a slowdown in the global economy, and oil demand, even as trade-war bombs continue to fly.
In fact, Trump's tariff policies and sanctions on other countries could boost oil demand, Courvalin said. For example, US sanctions on Venezuela could force the country to export to India and China instead of closer American and European refineries, Courvalin said.
"We believe that the strong combination of strong developed market momentum and accelerating emerging market growth will combine to keep oil demand growth above consensus expectations," Courvalin said.