‘OIL MAR­KET REBALANCING RAPIDLY’

De­mand to ex­ceed pro­duc­tion if Opec cuts ex­tend into sec­ond half, says Gold­man

New Straits Times - - Business -

LON­DON

De­spite last week’s sell­off, the global oil mar­ket was rebalancing rapidly, said Jef­frey Cur­rie, head of com­modi­ties re­search at Gold­man Sachs Group Inc.

If Opec were to ex­tend cuts into the sec­ond half — as the group has sig­nalled — de­mand would sig­nif­i­cantly ex­ceed pro­duc­tion, ac­cord­ing to the In­ter­na­tional En­ergy Agency’s head of Oil In­dus­try and Mar­kets, Neil Atkin­son.

“Do I want to be long in oil? The an­swer is ab­so­lutely yes be­cause we are go­ing into a deficit mar­ket,” said Cur­rie at the S&P Global Platts Global Crude Sum­mit, here, on Wed­nes­day.

“With de­mand con­tin­u­ing to sur­prise to the up­side, the global sup­ply deficit may be as wide as two mil­lion bar­rels a day by July,” he said.

Brent crude, the in­ter­na­tional bench­mark, fell to a five-month low of US$46.64 a bar­rel last week amid doubts on Opec’s ef­fec­tive­ness and Rus­sia’s joint sup­ply curbs.

Sub­se­quent sig­nals from Riyadh and Moscow that they could ex­tend cuts into next year failed to trig­ger much of a price re­cov­ery.

While the resur­gence in United States shale oil con­tin­ues to cause doubts about whether the three-year sup­ply glut re­ally is over, banks in­clud­ing Gold­man and Cit­i­group Inc say mar­kets are nev­er­the­less tight­en­ing and prices are poised to rise again.

The bulls got pow­er­ful back­ing on Wed­nes­day from the most keenly watched data on the mar­ket — the US De­part­ment of En­ergy’s weekly re­port on crude stock­piles.

The na­tion’s in­ven­to­ries fell by 5.2 mil­lion bar­rels last week, the big­gest re­duc­tion this year.

West Texas In­ter­me­di­ate crude ral­lied 3.3 per cent to US$47.40 within min­utes of the data re­lease. Bloomberg

BLOOMBERG PIC

De­spite the resur­gence in shale oil, banks in­clud­ing Gold­man Sachs Group Inc and Cit­i­group Inc say mar­kets are nev­er­the­less tight­en­ing and prices are poised to rise again.

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