Oil prices are likely to average $47 per barrel in the next three months, not $55, Goldman Sachs says.
The fast ramp-up in U.S. shale drilling and the unexpectedly large rebound in oil production in Libya and Nigeria means oil is likely to hover at $45 per barrel in the near term, Goldman Sachs analysts says.
Oil prices were up 0.8% per barrel in recent trading, with the U.S. benchmark at $45.12 per barrel and the international Brent price at $47.69.
Goldman moved its three-month target price for the U.S. benchmark West Texas Intermediate oil price to $47.50 per barrel from $55 per barrel, but analysts note that remains above the forward price curve. Goldman’s Damien Courvalin, Jeffrey Currie, Henry Tarr, Huan Wei and Callum Bruce write that the glut of supply will continue until the U.S. horizontal oil rig count declines, there are sustained draws on oil storage or there are additional production cut from the Organization of Petroleum Exporting Countries. Libya and Nigeria are OPEC members, but are exempted from this year’s cuts, which have had limited success in propping up prices. The Goldman team writes:
It’s not all bad, however: the Goldman team expects global oil inventories to be in deficit this year given demand, and with production disruptions at their lowest levels in 5 years, that means some supply is statistically bound to come offline. But they think “OPEC can (and in our view should) act and cut more than what Libya/Nigeria are adding.”
In trading today, The United States Oil Fund (USO) was up 1.2%, and the Energy Select SPDR exchange-traded fund (XLE) was up 0.8%. Shares of Brazil’s state-controlled oil producer and refiner Petróleo Brasileiro or Petrobras (PBR) were up 1.5%. Shares of China Petroleum & Chemical (SNP) were off 0.4%, and shares are down 1.4% this week, after it announced it would suspend fuel sales to North Korea, Reuters reported in an exclusive. South African chemicals producer Sasol (SSL) was down 1.7%