Demand to remain resilient
Goldman Sachs Research forecasts that oil demand will grow for another decade. Energy needs from emerging markets are set to increase sharply as their GDP grows at nearly 4% a year in the second half of this decade. As income rises in emerging markets, so will demand for road and air transportation.
Efforts to decarbonize are particularly challenging when it comes to plastics and air travel. Goldman Sachs Research expects the global number of air passengers to rise by 100% by 2040. However, when it comes to road transportation, the team forecasts a steeper decline in oil consumption per vehicle, as electric vehicle sales rise, than in oil consumption per air passenger.
In fact, EV sales are expected to weigh on oil demand in the medium term. The drag on global oil demand growth resulting from EV sales currently stands at around 0.4 million barrels a day. By 2026, Goldman Sachs Research sees that figure increasing to nearly 0.6 million barrels, assuming 17 million EVs are sold in 2026 (up from 11 million EV sales last year).
The role of geopolitics in energy prices
Geopolitical events will continue to have a significant influence on the oil market next year. Although the exact nature of these events can be difficult to predict, it’s possible to model the price of crude oil in different broad scenarios.
For example, if Iranian oil supply dropped by a million barrels a day, reflecting tighter sanctions enforcement in a “maximum pressure” campaign, the price of Brent could rise to the mid-$80s per barrel by mid-2025, assuming that OPEC+ increases its supply throughout the year.
Between the US leaving the nuclear deal with Iran in May 2018 and the start of the pandemic, Iran’s liquids exports declined by 2.4 million barrels per day, with exports to OECD countries falling to zero.
Hawkish comments on Iran from some US policy nominees suggest that a substantial drop in Iran oil exports is plausible. But any drop would likely be smaller than in 2018-2019, because China now has a 90% share of Iran’s oil exports.
Source: goldmansachs.com