Thursday, October 06, 2016 8:52:53 AM
By Tsvetana Paraskova - Oct 05, 2016, 9:28 AM CDT
Low-cost players such as Russia, combined with an upcoming ‘wall of supply’ from large-scale projects commissioned in the past 5-10 years, and additional supplies from Libya and Nigeria will make it difficult for crude prices to rise above US$55 in the near term, Goldman Sachs’s head of commodities research, Jeff Currie, said in an interview with Bloomberg television.
Oil prices have surged by more than US$5 since the OPEC deal on output was announced a week ago.
At the time of writing, WTI Crude traded up 1.87 percent to US$49.60 and Brent Crude was up 1.75 percent at US$51.76, also on the back of Tuesday’s report by the American Petroleum Institute (API), which showed an unusually strong draw of 7.6 million barrels of oil despite expert predictions that U.S. supplies would increase by 1.5 million units in the wake of multiple draw weeks.
Speaking to Bloomberg, Goldman Sachs’s Currie said he sees the market “very oversupplied” next year, and it was the oversupply side that made the OPEC members reach the agreement to limit the cartel’s production to a band of between 32.5 million and 33 million barrels a day, according to the analyst.
Low-cost players like Russia are increasing production, as well as market share, and that’s the “core of the new oil order”, the analyst noted.
Large international oil companies “destroy wealth, and right now they are not focused on return on equity; they are focused on creating cash flow,” Currie said. These companies are focused on “bringing on large-scale projects that could guarantee cash flows over the forward time frame; they are not focused on return”.
Last week, Goldman Sachs said that the OPEC output deal could add US$10 to crude prices. The Goldman analyst team, however, noted that it was skeptical about the chances of success for the deal. The bank pointed out that OPEC members don’t always feel obliged to stay within quotas, which will contribute to the ongoing uncertainty on oil markets.
By Tsvetana Paraskova for Oilprice.com
http://oilprice.com/Energy/Energy-General/Goldman-Sachs-Very-Oversupplied-Market-To-Stop-Crude-Rally-At-55.html
Avant Technologies Engages Wired4Tech to Evaluate the Performance of Next Generation AI Server Technology • AVAI • May 23, 2024 8:00 AM
Branded Legacy, Inc. Unveils Collaboration with Celebrity Tattoo Artist Kat Tat for New Tattoo Aftercare Product • BLEG • May 22, 2024 8:30 AM
"Defo's Morning Briefing" Set to Debut for "GreenliteTV" • GRNL • May 21, 2024 2:28 PM
North Bay Resources Announces 50/50 JV at Fran Gold Project, British Columbia; Initiates NI 43-101 Resources Estimate and Bulk Sample • NBRI • May 21, 2024 9:07 AM
Greenlite Ventures Inks Deal to Acquire No Limit Technology • GRNL • May 17, 2024 3:00 PM
Music Licensing, Inc. (OTC: SONG) Subsidiary Pro Music Rights Secures Final Judgment of $114,081.30 USD, Demonstrating Strength of Licensing Agreements • SONGD • May 17, 2024 11:00 AM