What's going on?

According to a report released over the weekend, Goldman Sachs thinks the oil price is going to get a substantial top-up sooner than it previously thought.

What does this mean?

Demand for oil has finally started rebounding from last year�s pandemic-driven lows, with the dusky nectar�s price gaining more than 20% this year. But Goldman thinks that rally�s only just beginning: the firm says the oil price will rise another 20% by the third quarter of the year (tweet this).

There are a couple of reasons why. First, Goldman thinks demand will be back to pre-pandemic levels by late July, with the vaccine rollout driving economic activity higher. And second, it reckons supply will keep lagging: oil producers are, after all, showing no signs of significantly ramping up production in the next two quarters.

Why should I care?

Zooming out: Commodities are a good way to protect against inflation.�

Between the mooted economic recovery and uptick in government spending, investors are starting to feel more confident that the prices of the world�s goods and services will rise (i.e. inflation). And as the prices of goods and services increase, so will the prices of the raw materials used to produce them. That�s why commodities are seen as a good �hedge� against inflation � another thing that could, according to Goldman, drive oil�s price higher.

Zooming in: The big freeze in Texas isn�t too big a deal for oil.�

The unprecedented cold snap in Texas � America�s biggest energy-producing State � has been moving the oil price lately too. The slippery elixir�s price initially rallied on worries that production would stall and supply would falter, only for that rally to sputter out after investors realized Texan refineries � which would take time to resume operations � would cause a drop in demand. Still, Goldman reckons the effect on supply and demand should balance each other out, and the impact on the global oil market should actually be pretty small.