Analysts at Goldman Sachs expect the global oil market to remain in deficit in the fourth quarter, leading to a strengthening in Brent time spread or a deeper backwardation in the Brent oil market.
Backwardation represents a downward sloping forward curve – a situation in which the price of a commodity for future delivery is lower than the spot price.
Key quotes (Source: Reuters)
- The global oil market will be in deficit in 4Q18, leading to a strengthening in Brent time spread
- Steeper backwardation to drive spot prices higher to its year-end $80/bbl forecast, with low positioning also pointing to price upside in the short-term
- The resolve of the U.S. administration in further reducing Iran exports to delay the subsequent decline in long-dated prices
- Expecting a decline in long-dated prices in 2H19 when the Permian becomes debottlenecked again (driving year-end 2019 Brent forecast to $65/bbl)
- Iran exports will sequentially decline with its export forecast at 1.15 mb/d into year-end
- Iran exports will further decline in early 2019 to 1.0 MB/d
- Long-term prices will decline further in 2019 – the key driver behind its end-2019 $65/bbl Brent forecast
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