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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Goldman Sachs: Shale Boom Caps Real Oil Price Gains Until 2020

Goldman Sachs

U.S. shale’s production growth will outstrip global oil demand growth this year, capping oil price gains until 2020, according to Goldman Sachs.

U.S. oil production is set to rise by 1.3 million bpd in 2019 and additional 1.2 million bpd in 2020, Reuters quoted Goldman Sachs as saying in a note on Sunday.

To compare, the investment bank sees global oil demand growth this year slowing to just 800,000 bpd, so U.S. shale growth is expected to outpace demand growth and keep a lid on oil prices, despite the fact that OPEC and its Russia-led non-OPEC allies rolled over their production cuts into the end of March 2020. 

On the other hand, OPEC’s continued commitment to curtail production to rebalance the market will also limit the downside for oil prices through 2020, Goldman Sachs said.

Next year, global oil demand growth is seen rebounding to 1.6 million bpd, according to Goldman Sachs.

“An exit strategy from the cuts was not discussed, and it remains to be seen whether the decision to extend cuts to accommodate shale growth will ultimately drive the need for deeper cuts in 2020,” the investment bank said in its note on Sunday, as carried by Reuters.

In view of the stronger U.S. shale growth than oil demand growth, Goldman Sachs left its 2020 oil price forecasts unchanged—at US$60 per barrel of Brent Crude and at US$55.50 per barrel of WTI Crude. These prices are slightly lower than the current prices as of early on Monday, when Brent Crude traded at around US$64 and WTI Crude at US$57.50.

Last month, Goldman Sachs said that fears of slowing economy and oil demand growth were “the largest driver of the move lower over the past month,” while other investment banks, including Barclays, Morgan Stanley, and Bank of America Merrill Lynch, warned that oil demand growth this year could be ticking up at its slowest pace at least since 2011 or 2012.

By Tsvetana Paraskova for Oilprice.com

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