Goldman Sachs says that crude will continue to trade within the US $45-50 band over the next 12 months and that any improvement above US$50 is highly unlikely.
Goldman Sachs head of commodity research, Jeff Currie, says the primary reason for the gloomy forecast is the simple lack of any upside potential for oil at present.
Currie, also suggested that the market may have already balanced itself at the current price levels, comparing the overall environment to that in the early 1990s when a barrel of crude sold for US$20.
He told Bloomberg that OPEC’s meeting in Algeria, scheduled for September 27, when the cartel will discuss a potential freeze with Russia, will not have any notable impact on oil prices, whatever the outcome.
Shale, he said, has taken the upper hand, because production in the shale patch can be ramped up or reduced much quicker than conventional oil.
This development, according to Currie, has taken much of the leverage that previously was at the disposal of conventional oil producers.
Currie’s remarks is coming on the heels of the latest Oil Market Report of the International Energy Agency, which warned that the growth in demand for crude will be slower than previously forecast this year.
The IEA added that the supply will continue to be excessive through the end of the first half of 2017 at least.
Of course, a lot of this supply will continue to come from the current top producers globally, but there may be additional barrels coming from Libya as well, which will certainly aggravate the glut and possibly drag prices down below US$45. Nigeria is also putting a lot of effort into resolving its problems with Niger Delta militants, and although success remains highly uncertain, it is still a possibility.
In light of this, Currie’s forecast can actually be seen as cautiously optimistic.
We are sorry that this post was not useful for you!
Let us improve this post!
Tell us how we can improve this post?