‘OIL MARKET REBALANCING RAPIDLY’
Demand to exceed production if Opec cuts extend into second half, says Goldman
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
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.