Re: Oil-GS Call for $90 Brent by YE’21.

GS out with a chart pack today, calling for “next leg higher in oil prices - from a cyclical to a structural bull market.” Summary points/editorial to follow.

“This dynamic has led to a historic 4.5 mb/d deficit, which should lead inventories to fall to their lowest level since 2013 by year-end...”

Two charts tell the story. Here’s supply:

Here’s demand:

I’ve postulated that the China Evergrande crisis would likely impact “opex” commodities like oil LESS than “capex” commodities like steel/cement. Here’s a chart that seems to corroborate the LACK of impact on oil:

I suspect that GS’ transition from being “cyclical” bulls to “structural” bulls has to do with this key chart of spare capacity:

This is Trillion Dollar Question — Where will global spare capacity be by 2023-2024? If we fall into that gray scenario below, we can expect “non-linear” fly-away oil prices.

The biggest risk to the “structural” / “super-cycle” thesis is what true OPEC spare capacity will be, and this is where my friend Lakshmi at Capital One chimes in with a note of caution — that GCC countries within OPEC are massively investing in spare.

I talk about some of those potential headwinds below.