Crude oil is unlikely to reach US$100 a barrel as various analysts have warned, Goldman Sachs’ chief of commodities Jeffrey Currie told S&P Global Platts in an interview. This is not the first time the analyst has countered the dominant sentiment: in September, Currie also said the chances of Brent hitting US$100 were slim although not impossible.
"We're not saying $100 oil cannot happen. It's not our base case nor do we think it's very likely," Currie said, adding "sustainable loss in all of Iran's oil exports for an extendable period of time" had to emerge for the bullish predictions to become a reality.
The analyst went on to detail the reasons for this cautiousness: in addition to indications that Iran’s oil exports will not fall to zero—and one might add they won’t even fall to half what they were before, at least not immediately—production is growing. Saudi Arabia, if we are to believe self-reported figures, has been raising its production faster than many expected, strengthening hopes that there will be enough supply even after U.S. sanctions against Iran kick in.
"In the last four months we have seen a 20% rise in drilling in Saudi Arabia, you have already lost 700,000 b/d of Iranian exports and inventories built, which tells you there is already a lot more oil in the market," Currie said.
And production from other OPEC members has been growing or, in the case of Libya, stabilizing, which also adds fuel to the bearish case for oil prices, supported by downward revisions of demand by the International Energy Agency and OPEC itself.
"Our base case is for a modest decline in inventories in the fourth quarter, which will likely keep prices somewhere around $80/b," Currie told S&P Global Platts, reiterating a previous stance in which the Goldman Sachs commodities department had estimated that Brent prices will remain range-bound between US$60 and $80 during the last quarter of the year.
By Irina Slav for Oilprice.com
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