In an interview with Bloomberg, Jeff Currie, Goldman Sachs’ Global Head of Commodities Research, noted that despite the recent corrective slide on hopes of output boost by the OPEC, the outlook for oil is still bullish.
Key Quotes:
“An increase of that magnitude — which was already his assumption — won’t prevent stockpiles from diminishing in the second half of this year.
It’s not enough.
Surging oil demand, particularly in the case of China, is likely to surprise the market to the upside. There’s also been a shift away from long-term investment in the oil industry toward short-cycle spending.
Between now and the end of this business cycle, I definitely want to be long oil.
While OPEC has a window of opportunity to manage the oil market without losing its share — due to infrastructure constraints in the U.S. — it will still take three or four months for the group to add supply
The market is currently heading for a shortfall of about 1 MMbpd between supply relative to demand.
While Goldman’s clients say the commodities space is “un-investible,” the strength of oil demand, as indicated by pricing structures, suggests they may be wrong.
Long-term investment in the oil sector has been “choked off’ in favor of short-cycle investment, and supplies from U.S. shale producers will likely be constrained through late 2019.”
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