Oil price ultra-bear Goldman Sachs turns mildly bullish

Record ID: 102990

  • Title: Oil price ultra-bear Goldman Sachs turns mildly bullish
  • Date: 16th May 2016
  • Summary: LONDON, ENGLAND, UK (FILE) (REUTERS) SHELL PETROL GARAGE SHELL SIGN/LOGO SHELL PETROL GARAGE SHOWING PRICE MAN FILLING UP AT THE PUMP SHELL SIGN MAN FILLING UP AT THE PUMP/SHELL SHOP SHELL PETROL GARAGE CRANE AT PETROL GARAGE
  • Embargoed: 31st May 2016 12:57
  • Keywords: Oil Goldman Sachs BP Shell equilibrium disequilibrum oversupply
  • Location: LONDON, ENGLAND, UK + GULF OF MEXICO, NORTH SEA
  • City: LONDON, ENGLAND, UK + GULF OF MEXICO, NORTH SEA
  • Country: United Kingdom
  • Topics: Commodities Markets,Economic Events
  • Reuters ID: LVA0014I23DE5
  • Aspect Ratio: 16:9
  • Story Text: U.S. bank Goldman Sachs, one of the most bearish forecasters on oil over the past year, on Monday (May 16) raised its short-term price outlook as it said the market had flipped into a deficit due to production outages in Nigeria and Canada.
    Goldman, one of the most active banks in commodities, had been predicting as recently as a few months ago that oil prices could fall below $20 a barrel due to global oversupply.
    On Monday (May 16), it said it now saw U.S. crude trading as high as $50 per barrel in the second half of 2016, although it cautioned that price rises would be modest in 2017 as the market would return to surplus.
    "We don't see a huge amount of evidence that supply and demand are really showing any real signs of getting back into equilibrium and indeed if one reads further down the Goldman Sachs report it would appear as if their forecast for the oil price as measured by WTI has been somewhat downgraded. They and a number of other forecasters believe that WTI will struggle to get above 50 both in their short term perhaps as a result of profit taking and over the medium to longer term as well and of course that's going to put some pressure on the oil majors and in particular it may once again call the important issue of dividend payouts into focus and we'll hear from Royal Dutch Shell later this year in relation to what they plan to do in relation to their dividend and I think that's pretty much key to investors thinking right now," said Jeremy Batstone-Carr, Chief Economist at Charles Stanley.
    Supply disruptions around the world of as much as 3.75 million barrels per day (bpd) have wiped out a glut that pulled oil prices down by as much as 70 percent between mid-2014 and early 2016.
    Goldman is one of the most active banks in providing hedging services to consumers and producers and its views are also followed by a large number of hedge funds.
    However, while Goldman was still predicting potential further declines in oil prices, speculators were raising their bullish bets on both U.S. crude and Brent throughout February, March and April.
    As a result, oil prices rallied nearly 80 percent from multi-year lows below $30 in January.
    Oil prices jumped by more than 2 percent on Monday on Nigerian supply outages and after Goldman revised its price forecast.
    "Well of course it's very hard to get a proper handle on what's really going on in Nigeria but certainly I and doubtless other viewers see the headlines. And on the face of it at least one has to say that outages and other issues associated with Nigerian production are at the margin detrimental to oil price production and therefore help at the margin in trying to address this supply and demand disequilibrium but of course Nigeria isn't the only oil producing country. There is a lot of expectation that maybe Iranian oil will increase in supply, so yes when you get negative headlines such as this, it does tend to have a positive knock on effect on the oil price's algorithms, take their view from news flow. But I'm afraid to say that on a underlying basis, it's marginal and may not last," added Batstone-Carr.
    Goldman also raised its global demand growth forecast by 200,000 barrels per day to 1.4 million bpd anticipating higher demand from Asia, especially China.
    The bank, however, lowered its U.S. crude price outlook for 2017 to $52.50 from $57.50 per barrel as it said markets would return to surplus by the first quarter of 2017.
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