En Español



Very usefull links



PW
Bookstore





News links

AP

AFP

Aljazeera

Dow Jones

Oil price

Reuters

Bloomberg

Views and News
from
Norway

 

 

 

 

Goldman Sachs forecast bullish oil market for 2018, 9% total returns prediction


2018 Brent view raised to $62 from $58; WTI to $57.50 from $55 . Bank sees lower inventories in 2018 on OPEC commitment to cuts. U.S. Oil Fills OPEC Supply Gaps at $60, Says Battle -Watch video

By Serene Cheong and Dan Murtaugh

SINGAPORE
Petroleumworld 12 06 17

Goldman Sachs Group Inc. predicts oil prices will retain their strength, at least through 2018.

The bank raised its forecast for U.S. West Texas Intermediate as well as global benchmark Brent crude, saying OPEC and its allies showed a stronger commitment than expected to extending their output curbs at the producer group's meeting last week. It expects positive total returns of 9 percent from crude over the next 12 months, according to a Dec. 4 report.

For more on Goldman's individual oil prices forecast changes, click here

The bank's bullishness is in contrast to Citigroup Inc., which  signaled it's bearish on prices as it predicts the Organization of Petroleum Exporting Countries, Canada, Brazil, Russia and the U.S. will look to add supplies. While Goldman believes that OPEC and its partners will fully comply with their output deal, it cautioned that shale and other producers will start to respond to stronger crude by 2019.

“We continue to find OPEC's assessment of the supply response to higher prices as too conservative, especially for shale,” analysts including Damien Courvalin wrote in the report. “We believe evidence of this response, with higher shale drilling activity and production in coming months, will play an important role in avoiding a policy overshoot from OPEC.”

OPEC and its partner nations, seeking to shrink bloated global inventories, agreed last week to extend production curbs that began in 2017 through to the end of next year. Goldman now anticipates full compliance to the agreement to last longer, and for the exit from the pact to be less dramatic. Goldman cut its forecast for OPEC and Russian oil output next year by 350,000 barrels a day to 44.3 million.

Oil Demand

The bank's optimistic on global oil demand growth and expects the output cuts to end early, with a ramp up in the third quarter of 2018. “At that point, however, we expect inventories to be close to their 5-year average level with an exit that keeps inventories near such level,” it said.

WTI, the U.S. marker, traded at $57.25 a barrel at 8:26 a.m. in London, while Brent, the benchmark for more than half the world's crude, was at $62.25 a barrel.

The bank now expects a wider gap between Europe's Brent and WTI, which is deliverable to Cushing, Oklahoma, because of surging production from the Permian Basin in west Texas.

Some output from the play has to go through Cushing in order to get to coastal markets, and TransCanada Corp. responded to the demand by raising spot rates on its Marketlink pipeline next year. That'll boost freight costs and widen the WTI-Brent differential to $4.50 a barrel, up from a previous estimate of $3, according to Goldman.

The bank also expects steeper backwardation -- a market structure where near-term futures are higher versus those for later delivery -- than what's currently priced in.

“Greater backwardation will, in turn, provide long investors with positive returns despite a spot forecast near current levels and we forecast +9% crude total returns over the next 12 months,” Goldman said in the report.


Story by Ezra Fieser; With assistance by Aline Oyamada from Bloomberg.

bloomberg.com
/ 12 05 2017

We invite all our readers to share with us
their views and comments about this article.

Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels


 

TOP

Contact: editor@petroleumworld.com,

Editor & Publisher:Elio Ohep/Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved.
Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2017, Petroleumworld ™  / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.