These reports re the Goldman Sachs outlook for oil hit during US time,. just posting as an ICYMI.
From the GS note:
- we are pulling forward our forecasted oil tightness with Brent prices now expected to reach $65/bbl this summer as opposed to year-end.
- With vaccines being rolled out across the world, the likelihood of a fast tightening market from 2Q21 is rising as the rebound in demand stresses the ability of producers to restart production.
- While higher prices pose the risk of a shale response - as WTI spot prices are now at $50/bbl allowing for higher activity and positive free cash flows - we see this response remaining muted in the first instance, as higher capital costs and producer discipline curtail the US E&P's reaction function.
- Moreover, OPEC+ March production level will still be near the recent lows just as global demand starts rebounding sharply driven by warmer weather and rising vaccinations.
- This points to the group potentially struggling to ramp-up output quickly enough, with our balance currently reflecting a 1.3 mb/d deficit in April-July despite OPEC+ increasing production by 4 mb/d, a historically tall order
- We continue to recommend a long Dec-21 Brent trade (currently trading at $53/bbl vs. our $65/bbl forecast) and expect sustained backwardation and lower implied volatility.
