Brent to retest $80/ barrel by end-2018 – Goldman Sachs

In its latest client note on oil prices, the US investment bank, Goldman Sachs, noted that it continues to expect high supply volatility with potential for further disruptions in the coming months.

Key Highlights (via Reuters):

Expect benchmark Brent crude in a $70-80 per barrel range.

Still expects Brent to retest $80 per barrel, although this may occur only late this year depending on U.S. oil policies, rather than this summer as it previously expected.

“Production disruptions and large supply shifts driven by U.S. political decisions are the drivers of this new fundamental volatility, with demand remaining robust so far.”  

“The uncertainty on the magnitude and timing of the supply shifts has muddied the near-term outlook for oil fundamentals.”  

“These supply shifts, alongside the ongoing surge in Saudi production, create the risk that the oil market moves into surplus in third-quarter 2018.”  

However, prices are expected to get some support longer term as global oil inventories are weak, according to the bank.

“Ultimately, global inventories are low, oil demand remains robust and we still expect a deficit once U.S secondary sanctions are reintroduced.”

“The recent escalation in trade tensions was unlikely to have much impact on its 2018 oil demand growth view, but would likely create downside risks to its 2019 oil demand growth forecast of 1.6 million barrels per day.”