‘PRICES COULD RISE 12 PERCENT’

OIL PRICES could potentially rise by as much as 12 percent from current levels, although the rally may prove fleeting, according to Goldman Sachs. Top Opec member Saudi Arabia is cutting output faster than US shale drillers can fill the gap, leaving a void in the market that may push global benchmark Brent crude to $70 (R977.65) to $75 a barrel in the near future, bank analysts led by Jeffrey Currie said. At the same time, supply disruptions in Venezuela are likely to accelerate in coming months, they wrote. “The oil market will likely continue to tighten significantly this March and April,” Currie said. “While prices could easily trade in a $70 to $75 a barrel trading range, we believe such an environment would likely prove fleeting,” he said, reaffirming Goldman’s forecast for Brent to end the year at $60. Brent has rallied 25 percent this year to about $67 a barrel after a collapse of 35 percent in the last quarter of 2018 as the Saudis spearheaded a plan by Opec and its allies to curb production. Signs the US and China are moving closer to a trade deal have improved the demand outlook, with US President Donald Trump saying over the weekend he’ll extend a deadline to raise tariffs on Chinese goods. Saudi Arabia is guiding to March production about 500 000 barrels a day lower than its own quota, Currie said. At least 100 000 barrels a day of Venezuelan exports have been lost, and this could rise to a daily 200 000 to 300 000 barrels in coming months if there’s no political resolution, he said. On the demand side, a surge in Chinese credit in January has eased fears of a slowdown in Asia’s biggest economy, the US Federal Reserve is tilting dovish and consumption data from India, France and Italy points to stronger growth, Goldman said. That means there are few downsides to the bank’s forecast of about 1.45 million barrels a day of demand this year . | Bloomberg