Goldman Sachs says it is cautiously optimistic on prices, citing large inventory draws, a declining US rig count , strong demand
Which is all suggesting that the rebalancing is accelerating.
The main points from GS (in summary):
Inventory declines are accelerating
- ... this high frequency data implying that half of the excess stock rebalancing has been achieved
- Our supply and demand forecasts point to sustained draws through 3Q, although higher US, Brazil, Canada and Libya production should reduce the pace of draws into year-end
Demand is beating low consensus expectation
- driven by robust economic activity and low prices
- Europe, the US, India and China driving consumption higher
- We expect such strong demand growth to remain in place in 2H 2017
Shale activity is beginning to slow
- the decline in prices to near $45/bbl over the past couple of months ... gradually translate into lower US activity
- This is occurring
- this decline is only modest
Disruptions are normalizing
- Libyan production continues to ratchet higher ... cease-fire reached ... potentially allowing production to reach the year-end 1.2 mb/d target
- Offset by renewed disruptions in Nigeria
- Disruption may further pick up in Venezuela
OPEC cuts are supported by rhetoric and flows
- Aggregate OPEC production is up since May on higher Libya/Nigeria and Iraq volumes
- Compliance among the core producers - which are ultimately the ones driving the cuts - remains strong, however
- larger cuts may be required if the recovery in Libyan production is sustainable
- Nigerian disruptions and stronger than expected demand can also help absorb this additional supply
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Oh, and on that ps.
Goldman Sachs also said they had spotted green shoots in March of this year.
