Goldman Sachs report, Nigeria outage propel Brent crude to near $50/bbl
Cuckoo James
16-May-2016
LONDON (ICIS)–Crude
futures rose to their highest levels in over six months on
Monday on the back of production outages in Nigeria and
investment bank Goldman Sachs noting a significant drop in
market surplus
The oil market continues to deliver its share of surprises
and has gone from near storage saturation to being in
deficit much earlier than expected, driven by both sustained
strong demand and sharply declining production, investment
bank Goldman Sachs said in a research note published on
Sunday.
The bullish tone of the report and supply disruptions in Nigeria drove Brent crude oil for July delivery to near $50/bbl on Monday, a level not seen since early November 2015.
The typically-bearish research team at the bank said: “We are pulling forward our price forecast, with 2Q/2H16 WTI now $45/bbl and $50/bbl.”
Source: Goldman Sachs – “The market has likely shifted into deficit in May”
On crude oil demand, Asia has been surprising boost to the upside, it said: “Stronger vehicle sales, activity and a bigger harvest are leading us to raise our Indian and Russia demand forecasts for the year.”
“And while we are reducing our US and EU forecasts on the combination of weaker activity and higher prices than previously assumed, we are raising our China demand forecasts to reflect the expected support from the recent transient stimulus,” Goldman Sachs said.
On the supply front, higher disruptions are taking a large toll on production
“And while some of the disruptions will stop such as maintenance, fires and strikes, some are likely systemic, for example in Nigeria, and we now expect production there will remain curtailed for the remainder of the year. Net, this leaves us expecting a sharp decline in 2Q output,” it said.
Crude prices continued to firm in the afternoon on the back of fundamentals and the bullish tone of the Goldman Sachs report, hitting new highs for the year.
Brent hit a intraday high of $49.47/bbl, the highest it has been since early November 2015, while the NYMEX contract stood at a high of $47.85/bbl.
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