Oil climbed to a six-month high as Goldman Sachs said the market moved into a deficit earlier than expected following supply disruptions in Nigeria and an increase in demand.
Futures rose as much as 2.6 per cent in New York. The shift to a supply deficit this month happened one quarter earlier than forecast, Goldman Sachs said in a report. The bank raised its price forecasts, while projecting a return to surplus early next year.
Militant attacks and pipeline outages have cut Nigerian volumes by at least 30 per cent, its petroleum minister said last week.After falling to a 12-year low earlier this year, oil has rebounded on signs the worldwide glut will ease amid production cuts. The supply surplus in the first half is proving to be smaller than estimated, the International Energy Agency said last week, citing robust demand in India and other emerging nations. Morgan Stanley, Barclays Plc and Bank of America Corp. joined Goldman Sachs in noting that supply losses are leading markets to rebalance.
"The oil market looks set on a course for rebalancing much faster than previously expected," Barclays analysts Miswin Mahesh and Kevin Norrish said in a report. "Fresh catalysts in the form of large and extended supply outages in Nigeria are supporting upward price momentum in oil, just when it seemed about to fade."
Goldman view
West Texas Intermediate for June delivery increased as much as $1.19 to $47.40 a barrel on the New York Mercantile Exchange, the highest since Nov. 4, and was at $47.22 by 8:37 a.m. local time. Total volume traded was near the 100-day average. Prices have climbed more than 75 per cent from their February low.Brent for July settlement increased as much as $1.25 to $49.08 a barrel on the London-based ICE Futures Europe exchange. The contract declined 25 cents to close at $47.83 on Friday. The global benchmark crude was at a premium of 96 cents to WTI for July.
Goldman increased its WTI price forecasts for the second quarter through the fourth, while raising its full-year 2016 projection to $44.60 a barrel from $38.40. There’ll be a more gradual decline in inventories in the second half than previously estimated and a return to a production surplus in the first quarter of 2017, with low-cost output continuing to grow, the bank said.
“The physical rebalancing of the oil market has finally started,” Goldman analysts Damien Courvalin and Jeffrey Currie wrote in the report dated May 15. “The market has likely shifted into deficit in May.”
Bloomberg
