• 1 day U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 1 day Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 2 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 2 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 2 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 2 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 2 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 2 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 2 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 3 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 3 days Venezuelan Output Drops To 28-Year Low In 2017
  • 3 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 3 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 3 days Kinder Morgan Delays Trans Mountain Launch Again
  • 3 days Shell Inks Another Solar Deal
  • 4 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 4 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 4 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 4 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 4 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 4 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 4 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 4 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 4 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 4 days Norway Grants Record 75 New Offshore Exploration Leases
  • 5 days China’s Growing Appetite For Renewables
  • 5 days Chevron To Resume Drilling In Kurdistan
  • 5 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 5 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 5 days Nigeria Among Worst Performers In Electricity Supply
  • 5 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 5 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 6 days Saudis To Award Nuclear Power Contracts In December
  • 6 days Shell Approves Its First North Sea Oil Project In Six Years
  • 6 days China Unlikely To Maintain Record Oil Product Exports
  • 6 days Australia Solar Power Additions Hit Record In 2017
  • 6 days Morocco Prepares $4.6B Gas Project Tender
  • 6 days Iranian Oil Tanker Sinks After Second Explosion
  • 8 days Russia To Discuss Possible Exit From OPEC Deal
  • 8 days Iranian Oil Tanker Drifts Into Japanese Waters As Fires Rage On
Alt Text

Iranian Protests Will Not Impact Oil Prices

Iran’s oil industry has remained…

Alt Text

What’s The Limit For Permian Oil Production?

The Permian, dubbed as the…

Alt Text

Strong Oil Demand Growth Supports Oil At $70

Brent crude retreated a bit…

Goldman Sachs Turns Bullish On Oil

Goldman Sachs offices

Goldman Sachs is known to make outlandish calls on crude oil. First came a forecast of $200 a barrel back in March 2008, which fell flat on its face within months. The second was a call of $20 a barrel made in September 2015: To be fair, though crude did not actually make it to this catastrophic low, it did come down to $27 a barrel. It was close.

Now, in a recent report, analysts including Damien Courvalin at Goldman have turned “tactically bullish,” forecasting $55 a barrel for the first half of 2017, up from their earlier forecast of a range-bound market between $45 and $50 a barrel for that period.

However, they have not upgraded their annual average of $52.5 a barrel for next year. While the first half’s forecast for 2017 has been upgraded, the forecast for the second half of next year has been downgraded from $55-$60 a barrel to $50 a barrel, as the bank expects OPEC to resume production and U.S. shale oil supply to increase.

(Click to enlarge)

Even without the OPEC production cut, Goldman sees the second half of next year tip over to a deficit. Hence, the bank believes that a production cut by OPEC will not hurt them for more than six months, as they can return to their normal production by the second half of next year.

“With greater confidence that the global oil market can finally shift into deficit later next year, we now believe that there is a strong rationale for low-cost producers to deliver a swift production cut to normalize inventories,” the analysts said, as cited by Bloomberg.

Let’s examine the possibility of a deal on November 30 and the likely effect on oil prices.

The future of oil prices, at least in the short-term, hinges on the OPEC meeting in Algiers. Related: The Economy Needs Higher Oil Prices – Goldman Sachs

The initial signs point to an all-out effort by OPEC to secure a deal. Initially, though, both Iran and Iraq had objections to the 4-4.5 percent across-the-board production cut proposed by Algeria for all members, barring Libya and Nigeria. Nevertheless, the cartel has been able to convince Iraq to go ahead with a cut of some magnitude—potentially the 4 to 4.5 percent cut.

"At the end of the day, we are probably going to get about a million barrels a day of cuts from OPEC and that's going to drive the market into deficit," Bart Melek, the head of commodity strategy at TD Securities in Toronto. ''We are seeing communications from Iraq that they would be happy to participate," reports The Business Times.

That only leaves Iran, which is still not on board with the formula.

On the production front, Iran has reached 4 million barrels a day. Previously, Iran had said it would come to the table for talks only after reaching its pre-sanction level of production.

However, the new President-elect in the U.S. had promised to “tear up” the nuclear agreement with Iran during his campaign. And while the Iranians are not acknowledging the threat to the deal, the uncertainty is palpable.

"There's just no way the Iranians are going to agree to this," Again Capital's John Kilduff told CNBC. "I think they see a horizon, potentially, where their oil production and exports get disrupted again by the new Trump administration … so why would they agree to any sort of cut at all right now?" Related: Obama’s Last Regulations To Impact Oil, Gas And Mining

Among the non-OPEC nations, Russia has agreed to freeze production, but is not willing to cut production. Russia is attempting to convince OPEC that even a freeze by Russia is equivalent to a production cut, because Russia had planned to increase production in 2017.

“While there’s actually nothing new from Russia today, Moscow is changing its rhetoric to show its commitment to a deal,” said Alexander Kornilov, an analyst at Aton LLC in Moscow. “The new wording shows Russia is trying to convince OPEC partners,” reports Bloomberg.

OPEC will announce a deal (or no deal) at the end of the meeting on November 30, which should give a small pop to oil prices if favorable. The markets, however, will be keen to look at the numbers in the subsequent months to analyze whether the OPEC members and Russia adhere to their production quotas or whether there is blatant cheating.

Though a pop above $52 a barrel in WTI is not inconceivable, sustenance and a huge rally is unlikely, regardless of a cut.

By Rakesh Upadhyay for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • John on November 28 2016 said:
    The only thing driving the market higher is Goldman Sucks paid announcements so they can receive their future rewards via ipoaramco and reap rewards off their day trading desk.
    I smell a red herring and its in GS back pocket!

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News