US oil futures were rallying on Tuesday, amid increased optimism about reaching a balance of supply and demand in the market.
Over the weekend Goldman Sachs reiterated its bullish stance on oil prices.
“Given our rising confidence in the market rebalancing next year, we are bringing forward our forecast for higher long-dated prices, with 3-year forward Brent expected to reach $58/bbl by end-2021,” analysts wrote in a note sent to clients.
The investment bank also raised its forecasts for spot prices and futures in the crude market.
On Monday, Energy Intelligence Group, a service which covers the international oil and gas markets, also reported that several OPEC+ members had submitted plans for “catch up” cuts to oil production to bring them in-line with wider plans drawn up earlier this year by the group of oil producing nations. Iraq, Kazakhstan, Equatorial Guinea, and Brunei have all submitted plans to cut production in a bid to support prices, according to the report.
US oil futures continued to be supported by weakness for the dollar. The US dollar index, which measures the greenback against a basket of international currencies, has fallen over 6% since June.
Oil futures are priced in dollars and a weak dollar should theoretically push up the price of oil as the greenback’s purchasing power is less. The US dollar index was down 0.2% on Tuesday.
“The currency has been on the defensive in the aftermath of last week’s changes by the Fed to its policy framework,” said Oliver Mangan, chief economist at AIB.
Oil prices cratered earlier this year as the COVID-19 pandemic led to collapsing demand around the world. Crude futures turned negative for the first time in history in April — meaning investors had to pay people to take future delivery of oil — and crude futures remain around 30% below where they started the year.