NRGU - Banking crisis has weighed on oil but Goldman's Jeffrey Currie sees higher prices

2023-03-23 07:39:39 ET

With the banking crisis disrupting the macroeconomic outlook, Goldman Sachs' Jeffrey Currie acknowledged that the uncertainty has weighed on oil prices, calling the situation a "big, scarring event" and lowering his 2023 end-of-year target from $100 to $94 a barrel.

Still, the Goldman Sachs global head of commodities research told CNBC that he sees higher prices from here, as the underlying fundamentals point to rally from the current level of below $71.

"I think the key message here is fundamentally we haven't seen a big significant shift," he said. "Physical markets are going to have to drive this market higher."

Currie argued that the impact of the banking crisis on the oil market was not fundamental, meaning the long-term effect will be very limited. However, he added that because of the turmoil, "it's going to be a longer path forward."

"Regional banks' reduction in lending and, on the demand side, that would be relatively small because the lending is more on the industrial and supply side," he explained.

Currie concluded that physical indicators, such as time spreads and refining margins, have remained stable, indicating that in-use demand is still strong and will continue to drive the physical market higher.

In Thursday's early trading, crude ( CL1:COM ) was trading at $70.35, -0.8% .

Here was the action in oil-focused ETFs on Wednesday : ETFs: XLE -2.1% , XOP -2.7% , VDE -2.2% , OIH -3.5% , SCO -0.9% , GUSH -5.7 , NRGU -5.4% ; whereas USO +0.6% , BNO +0.7% , UCO +0.9% , DBO +0.4% , USL +0.3% , DRIP +5.7% , USOI +0.4% .

For more on Crude Oil analysis, see why Seeking Alpha contributor Stock Waves says, " I remain bullish on oil prices with a 3-5 year view, and bullish on oil producers with low decline rates. "

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