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Iranian supplies won’t halt oil price surges: Goldman Sachs

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Goldman Sachs expects Brent prices to reach $80 a barrel despite a possible return of supplies from Iran.

A potential return of Iranian crude supplies into the global markets won’t stop a surge in oil prices being fueled by a recovery in demand after an easing of coronavirus restrictions around the world, says the Goldman Sachs bank.

The bank said in its most recent note that oil prices will still hit $80 per barrel in the fourth quarter of this year despite speculations that Iranian supplies would resume following a potential deal between the country and world powers to revive a 2015 nuclear deal, known as the JCPOA.

The note, covered in a Monday report by Reuters, said that the markets had in fact underestimated how much demand for crude would recover from a hit that began in early 2020 when the coronavirus was declared a global pandemic.

Goldman said that resumption of Iranian supplies would be an “aggressive” scenario which could not halt the surge in prices.

"Even aggressively assuming a restart in July, we estimate that Brent prices would still reach $80 per barrel in fourth quarter, 2021, with our new base case for an October restart still supporting our $80 per barrel forecast for this summer,” said the bank's note.

It said increased travel in major economies of the world as a result of easing of coronavirus lockdowns and restrictions would help boost demand for fuel and cause a fresh increase in crude prices.

“Mobility is rapidly increasing in the US and Europe, as vaccinations accelerate and lockdowns are lifted, with freight and industrial activity also surging,” said the note.

It said members of the Organization of the Oil Producing Countries and allies, a grouping known as OPEC+, would also maintain a series of cuts to supply into the second half of this year to offset the impacts of Iran’s increased crude exports.

Crude prices rose slightly on Monday after reports suggested that Iran and the US could fail to reach an agreement in indirect talks being held in Austria to revive the JCPOA.

Prices fell last week after Iranian authorities said the US was ready to lift key sanctions on Tehran as a step toward reviving the JCPOA, more than three years after it was abandoned by a former administration in Washington.

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