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Healthy demand, OPEC curbs to push oil higher–Goldman Sachs

Healthy demand, OPEC curbs to push oil higher–Goldman Sachs

Mubasher: Goldman Sachs is doubling down on its bullish bets for oil prices, citing healthy demand and supply-cutting efforts

Goldman Sachs still projects that international benchmark Brent crude would reach $67.50 per barrel (pb) in the second quarter of this year, owing to a solid demand, and the output curbs by a producer group led by the Organization of Petroleum Exporting Countries (OPEC), including Russia, the US bank’s analysts said in a report on Tuesday.

The New York-based lender’s forecast is nearly 7% higher than the current price levels.

OPEC reported on Tuesday that its oil output declined by 797,000 barrels per day (bpd) last January.

Brent has struggled to retain gains this month after a resilient start to the year on worries that a shale boom would undermine OPEC-led cuts, and the US-China trade conflict would dent demand.

The scale of the collapse in global growth outlook is unwarranted, and production losses this year are already bigger than anticipated, Goldman said.

“Core-OPEC producers are adopting a shock and awe strategy, and exceeding their cut commitment,” the report stated.

Supply shortages have increased on mounting risks that a drop in Venezuelan oil output accelerates after imposing further US sanctions against the Latin American nation’s hydrocarbon industry, Goldman said.

In addition, “US producers are also so far guiding towards restrained shale production growth,” the bank’s analysts added.

However, Goldman Sachs remained “cautious” on the price outlook for the second half of this year, as it predicts the marginal cost of production would decline.

By 1:13 pm GMT, Brent crude futures climbed 0.85% to $62.95 pb, while US Nymex futures rose 0.58% to $53.41 pb.