Oil Rises as Goldman Sees Shortfall
16 May 2016 - 10:50PM
Dow Jones News
Oil prices climbed Monday as Goldman Sachs said that the market
is now in shortfall, boosting a sector that has suffered from a
severe glut for almost two years.
The global crude benchmark Brent was up 1.6% at $48.59 for July
cargoes while West Texas Intermediate was up 1.5% to $46.91 for
June deliveries.
Goldman Sachs said that the recent outages from large producers
such as Canada and Nigeria had sent the oil market from nearing
full storage levels to being in deficit.
Goldman Sachs has been among the most bearish of banks on the
price of oil. It still predicts tough times ahead for the sector,
saying that low-cost oil producers could push the market back into
surplus by early 2017.
The bank remains relatively negative on price, forecasting $45
oil by the first quarter of 2017 and $60 a barrel by the end of
that year.
New production outages in Nigeria, caused by attacks on
infrastructure, are likely to continue supporting the oil price in
the short term. They come just as concerns over supply in Canada
are starting to fade as its oilfields restart following shutdowns
caused by wildfires.
These disruptions to supply are taking oil out of the market
just as Iran is pumping more crude, said Barclays, which predicted
the outages to last throughout this month and perhaps longer.
Still, the biggest driver in the oil price is an uptick in
global demand, not supply, Barclays said. A mild northern
hemisphere winter had sapped energy consumption, but strong demand
from China and India are now providing support for oil prices.
"The most significant upward revisions to demand have been made
in China, where the effect of the government stimulus package has
improved what was a very weak picture for diesel demand," Barclays
said.
Chinese independent oil refiners, known as "teapots," are
driving some of that demand, with even the world's major oil
producers now offering to supply cargoes. The global oil pricing
agency Platts reported Monday that the Saudi Arabian Oil Company,
known as Saudi Aramco, was loading a cargo of crude oil that will
eventually be delivered to independent Chinese refiner Shandong
Chambroad Petrochemicals Co. That would be the first delivery to
that market from a major oil producer.
Nymex reformulated gasoline blendstock—the benchmark gasoline
contract—rose 1.1% to $1.61 a gallon. ICE gasoil changed hands at
$426.75 a metric ton, up $8 from the previous settlement.
Georgi Kantchev contributed to this article
Write to Kevin Baxter at Kevin.Baxter@wsj.com
(END) Dow Jones Newswires
May 16, 2016 08:35 ET (12:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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