Goldman Blames Canada For WTI Price Spike

While all eyes watched the OPEC saga last week, there was an outage in Canada's oil sands that will cut production at least through July, supporting the U.S. benchmark prices, according to Goldman Sachs.

Following a power outage at Syncrude Canada's oil sands facility near Fort McMurray, Alberta, last week, oil production is expected to be offline at least through July, spokesman Will Gibson told Reuters on Friday.

The Fort McMurray site has a capacity to produce up to 360,000 bpd.

The halt could lead to a shortage in North America's supplies and draw down stockpiles at Cushing, Oklahoma, supporting U.S. oil prices, Goldman Sachs said in a note on Sunday, as carried by Bloomberg.

The ambiguous agreement to boost production that OPEC reached last week, on the other hand, will weigh on the international Brent Crude benchmark prices, according to Goldman Sachs.

At 07:51 a.m. EDT on Monday, the U.S. benchmark WTI Crude was up 0.25 percent at $68.75, while Brent Crude was down 1.57 percent at $74.14.

"With the global market pricing to pull crude out of the U.S., this loss of U.S. supplies will exacerbate the current global deficit, making the increase in OPEC production all the more required," Goldman Sachs said.

"And while Saudi is already ramping up exports, these will not be delivered until August with June stock draws already accelerating."

Goldman analysts affirmed for yet another week their summer forecast for Brent Crude prices at $82.50 a barrel and year-end projection for $75 per barrel. Related: What Will Follow The Age Of Oil?

Ahead of the OPEC meeting last week, Goldman Sachs reiterated its bullish view on oil prices, with strong demand growth and further supply losses pointing to continued declines in inventories and higher oil prices for the rest of the year, despite expectations that OPEC and Russia would boost production.

After the OPEC deal was clinched last week, Goldman continues to believe that even if OPEC and friends were to aggressively boost production, they would not create "a large reversal in fundamentals."

The bank expects only a slim surplus, even if OPEC and Russia aggressively ramp up production, which would leave the market with little spare capacity.

By Tsvetana Paraskova for Oilprice.com

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