Goldman Sachs Analyst: ‘Incredibly Bullish’ on Oil, Upside Risk is ‘Tremendously High’

An employee is seen at an oil platform operated by Lukoil company at the Kravtsovskoye oil field in the Baltic Sea, Russia, on Sept. 16, 2021. (Vitaly Nevar/Reuters)

Oil prices are heading up in summer 2022 according to Goldman Sachs analyst Jeff Currie, who believes prices are being mainly driven by underinvestment in the sector.

“The bottom line is the situation across the energy space is incredibly bullish right now. The pullback in prices we would view as a buying opportunity,” said Currie, global head of Commodities Research in Global Investment Research (GIR) at Goldman Sachs, in an interview with CNBC. “At the core of our bullish view of energy is the underinvestment thesis.”

The only way to solve problems in the energy sector is through investments, he pointed out.

However, money has been fleeing the energy sector, Currie said. Goldman Sachs is estimating oil prices to move up this summer in the range of $140 per barrel, he said. Currie pointed to the situation in Europe, where Russian gas coming into the region will have to be replaced. He said he believes oil is going to be one of the replacements.

The “upside risk” on oil and oil products is “tremendously high right now,” Currie added.

The need for investments in the energy sector was also highlighted by ExxonMobil CEO Darren Woods in a recent interview with CNBC, where he said that underinvestment in oil and gas correlates to higher prices of these commodities.

Denton Cinquegrana, chief oil analyst at Oil Price Information Service, pointed out that more investment in additional oil refining does not make sense from the refiner’s perspective given the broad transition to renewables.

“You’re talking about a lot of money to get these refineries that are idled up and running ... when I’m being told five years from now, we hope you don’t exist,” Cinquegrana said to NPR.

Washington’s Policies

Speaking at the Bernstein’s Strategic Decisions Conference on June 1, Chevron CEO Mike Wirth criticized the American government’s policies on fossil fuels.

“We’ve seen refineries closed. We’ve seen units come down. We’ve seen refineries being repurposed to become bio refineries. And we live in a world where the policy, the stated policy of the U.S. government is to reduce demand for the products that refiners produce,” Wirth said, while adding that he doesn’t believe a new petroleum refinery will be built in this country again.

The last refinery was constructed in the 1970s.

President Joe Biden recently complained that U.S. refineries were pushing gas prices higher by reducing capacity by 800,000 barrels per day. However, industry representatives rebutted the allegation, stating that half of the refineries that have shut down did so because they were converted to renewable fuel production.

The federal government also canceled new oil lease sales in the Gulf of Mexico and Alaska, as well as the $9 billion Keystone XL pipeline.