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Oil Prices Set For Worst Weekly Drop In Five Weeks

Concerns about weakening global economy…

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 Slashes 3-Month Oil Price Forecast By $7.50

Goldman Sachs is slashing its three-month price forecast for WTI to US$47.50 a barrel from US$55, seeing output gains in Libya and Nigeria as jeopardizing OPEC’s efforts to reduce global inventories, so the cartel may have to cut deeper in order to prop oil prices.

“This threatens to close the window of time for stocks to normalize before OPEC cuts end and raises the concerns that OPEC will then ramp up production to defend market share,” Goldman analysts Damien Courvalin and Jeff Currie said in a report, as quoted by Bloomberg.

Just a week ago, another team of Goldman analysts, the bank’s European energy team, thinks otherwise, saying that the selloff in energy stocks is but an opportunity for buyers, and that current low prices are likely unsustainable in the long run.

Goldman’s last week note came while the oil prices dropped to a ten-month low.

In this week’s report, the investment bank thinks that output gains in production-cut-exempt Libya and Nigeria could derail the inventory drop expected in the third quarter this year.

“The approach adopted so far by OPEC, akin to a central bank, has ultimately proved self-defeating by cutting too little but reassuring too much,” according to Goldman.

Earlier this week, reports suggested that while OPEC may be mulling over deeper oil production cuts, they won’t be rushing to make that decision, even though a panel monitoring the cuts will be meeting next month. But today, UAE Energy Minister said there were no such mulling

According to the Dallas Fed Energy Survey for the second quarter, the majority of executives from 112 oil and gas firms—67 percent—said they expect the oil market to come into balance in 2018 or sooner, with a third saying it will be 2019 or beyond. Eleven percent believe that the balancing will happen sometime in the second half of 2017. Related: The World Is Millions Of Barrels Away From Peak Oil

Goldman’s warning that rising supply would offset expected inventory declines and weigh on oil prices comes after Bank of America Merrill Lynch and oil and gas consultancy FGE said that oil prices are headed into the US$30s if OPEC doesn’t make steeper cuts.

Following last week’s selloff, oil prices hit a two-week high on Thursday, after the EIA data showed that U.S. weekly crude oil production dropped to 9.250 million bpd in the week to June 23, from 9.350 million bpd the previous week.

At 8:52am EDT on Thursday, WTI Crude was up 1.16 percent at US$45.26, while Brent Crude was trading up 1.18 percent at US$47.87.

By Tsvetana Paraskova for Oilprice.com

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  • James on June 29 2017 said:
    Must be trying to cover their short positions. They need to pick a side and not forecast against each other.

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