Goldman an oil bull; sees prices retaining strength

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

The bank raised its forecast for US 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 nine per cent from crude over the next 12 months, according to a December 4 report.

The bank’s bullishness is in contrast to Citigroup Inc, which signalled it’s bearish on prices as it predicts the Organisation of Petroleum Exporting Countries, Canada, Brazil, Russia and the US 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 pro-

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.

We continue to find Opec’s assessment of the supply response to higher prices as too conservative, especially for shale

Analysts

duction 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. — Bloomberg — Reuters

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