Although crude oil inventories in the U.S. are expected to rise, the global oil market is showing signs of tightness and will continue to see crude stocks draw down, Goldman Sachs has said in recent note.
“We do not view the recent U.S. builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness,” Reuters quoted Goldman analysts as saying on Tuesday.
In addition, Goldman Sachs expects the higher base demand growth this year – projected at 1.5 million bpd – to fully offset increased production in the U.S.
However, the oil market needs to see “show me the activity:” real demand and stock drawdown, Goldman noted, as reported by CNBC.
“Markets need to see that the OPEC supply cuts generate real inventory draws and the strong manufacturing survey and Chinese credit data create real activity. In other words, ‘show me the activity:’ real demand, real stock draws and empty warehouses,” according to the analysts.
Goldman left unchanged its Brent and WTI price forecasts for this year, seeing the price of Brent rising to US$59.00 and WTI – to US$57.50 per barrel in the second quarter, and then falling to US$57 and US$55 per barrel for the remainder of the year.
Just as OPEC started implementing the supply-cut deal to boost prices and rebalance the market, Goldman Sachs said in early January that the reduced supply in the first half of 2017 would move the market into deficit and draw down the current large oversupply.
However, recent rising inventories in the U.S. and the talk that OPEC might be prepared to extend the production cuts beyond the initial expiry date at end-June support the theory that the global inventory drawdown may not come as early as it was expected.
By Tsvetana Paraskova for Oilprice.com
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