'The rebalancing of the oil market has likely been achieved, six months sooner than we had expected'
Crude climbed by the most in a week amid a wave of bullish sentiment pinned on expectations that tightening supplies and a rosy economic outlook will keep prices elevated.
Goldman Sachs Group Inc. boosted a price forecast by a third and said global crude markets have probably rebalanced.
The bank now estimates Brent will reach US$75 a barrel over the next three months and will climb to US$82.50 within six months, analysts including Damien Courvalin wrote in an emailed report. Their previous estimate for both time periods was US$62 a barrel.
“The rebalancing of the oil market has likely been achieved, six months sooner than we had expected,” Goldman’s analysts wrote. “The decline in excess inventories was fast-forwarded in late 2017 by stellar demand growth, high OPEC compliance, heavy maintenance as well as collapsing Venezuela production.”
Futures rose for a second day in New York, adding as much as 1.4 per cent. The dollar declined, further adding support to crude prices.
Investor sentiment remains positive due to strong economic data and general weakness in the dollar, Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. “All this, when combined with a futures curve that is in backwardation, tends to be an open invitation for being long oil.”
As the Organization of Petroleum Exporting Countries trims production, U.S. oil output is surging. Production rose above 10 million barrels a day for the first time in more than four decades in November, while U.S. crude stockpiles broke a 10-week run of draw-downs last week, Energy Information Administration data showed Wednesday. The U.S. benchmark has remained above US$60 a barrel since late December, lending support for American drillers to pump more.
West Texas Intermediate crude for March delivery advanced 72 cents to US$65.45 a barrel at 9:54 a.m. on the New York Mercantile Exchange. Total volume traded was about 27 per cent above the 100-day average.
Brent for April settlement jumped 72 cents to US$69.61 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of US$4.37 to April WTI. The March contract expired Wednesday.
The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, weakened for a third day.
“The decline in excess inventories was fast-forwarded in late 2017 by stellar demand growth, high OPEC compliance, heavy maintenance as well as collapsing Venezuela production,” Goldman analysts Damien Courvalin and Jeff Currie said in the report.
The bank also said rising U.S. shale supply actually will be needed to keep the market steady in the near-term, since any ramp-up in OPEC output will lag the rebalancing. Yet, the bank said its view was cyclical and sees Brent dropping down to US$60 a barrel by 2020.