Goldman bullish amid Saudi-Russia oil plan
singapore — The outlook for oil is still bullish, according to Goldman Sachs Group. A plan by Saudi Arabia and Russia to revive production after over a year of curbs to clear a global glut signals supplies are currently tight, and isn’t a bearish development, analysts including Damien Courvalin wrote in a report. Even if the nations boost output by 1 million barrels a day, that would only offset involuntary production declines, according to the bank.
Goldman has been an oil bull since early last year, saying growing demand and output reductions by Opec and its allies will help revive crude from the worst crash in a generation. Now, as prices retreat after surging to levels last seen in 2014, the bank’s sticking to its optimistic stance and sees the current decline as temporary. Its latest report follows another earlier this month, when it admonished money managers who cut their bullish bets on oil.
“The current level of the market deficit, the robustness of the demand backdrop, and the rising levels of disruptions all set the stage for inventories to fall further,” the analysts wrote in the May 25 report. The proposal for the Organisation of Petroleum Exporting Countries to lift output will require additional increases in production in 2019, which will further reduce already limited spare capacity next year, according to the bank. Prices are falling after Saudi Arabia and Russia last week signalled they’ll restore some of the output they halted as part of an accord with 22 other nations. Most producers weren’t consulted about the proposal to revive supplies.
UAE Minister of Energy and Industry Suhail bin Mohammed Faraj Faris Al Mazrouei and current holder of Opec’s rotating presidency, said the group as a whole will decide whether to adjust production.