From Bloomberg/Arabian Business
According to Goldman, the market will have re-balanced by mid-2018
OPEC’s desire to clear the global oil inventory overhang may come sooner than expected, enabling the group to exit from its production cuts early, according to Goldman Sachs Group Inc.
Global stockpiles will remain below seasonal levels and continue to shrink through the second quarter of next year, said the bank. The market will have re-balanced by mid-2018, fast-forwarding OPEC’s exit from production cuts to the second half of the year, according to Goldman. It kept its forecast for Brent crude at $62 a barrel.
Goldman is one of the most bullish banks for oil next year and this month boosted its price forecast for Brent, the benchmark for more than half the world’s oil, on the producers’ strong commitment to the cuts. Prices are on course for a second yearly gain after the Organization of Petroleum Exporting Countries and its allies last month agreed to extend supply curbs to the end of 2018 to shrink bloated inventories.
“The oil re-balancing continued its progress through November,” driven by factors including “stellar”’ demand growth, bank analysts including Jeffrey Currie said in a December 19 note. “Global inventories will have re-balanced by mid-2018, leading to a gradual exit from the cuts.”
The bank forecasted a market structure known as backwardation, which indicates concerns about a short-term scarcity of supplies, to strengthen further in the second quarter as OECD stockpiles reach and remain at five-year average levels.
From Bloomberg
Strong oil demand
Oil is on track for a yearly rise following a decision by the Organization of Petroleum Exporting Countries and its allies to extend supply cutbacks through the end of 2018. Global stockpiles will remain below seasonal levels and continue to shrink through the second quarter of next year, according to Goldman Sachs Group Inc.
Saudi Arabian Oil Minister Khalid Al-Falih said that he’s optimistic about the global oil-cuts pact, yet he also said that oil inventories won’t be near the level needed by the time OPEC meets in June. Meanwhile, Kuwait’s Oil Minister Bakheet Al-Rashidi said compliance with the output cuts reached 122 percent in November, the highest monthly level since the agreement took effect in January.
West Texas Intermediate crude for February delivery added 53 cents to settle at $58.09 a barrel on the New York Mercantile Exchange.
Brent for February settlement gained 76 cents to end the session at $64.56 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.47 to WTI.
U.S. crude inventories slipped to 436.5 million barrels last week, the lowest level since October 2015, while crude exports jumped by 772,000 barrels a day, the Energy Information Administration said on Wednesday.
The data “confirms that inventory levels are declining at an exceedingly high rate,” Adam Wise, who oversees an $8 billion energy portfolio at John Hancock Financial Services Inc. in Boston, said by telephone. “The global economy is doing well and you’re seeing strong demand.”
Meanwhile, gasoline stockpiles climbed 1.24 million barrels, and distillate supplies increased by 769,000 barrels, more than triple what was forecast in a Bloomberg survey. Crude production remained at a record-high.
