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Oil finds haven against US supply threat in rosy Goldman view

Feb 02 2018 10:55
Heesu Lee, Bloomberg

Seoul - The specter of expanding US supply haunting the oil market is being beaten back by Wall Street banks’ faith in a price rally.

US futures are on course to end the week little changed, after they were whipsawed by concern about rising American production and optimism over rosy outlooks painted by forecasters including Goldman Sachs. West Texas Intermediate crude in New York has rebounded 2.5%, recouping almost all of its losses over Monday and on Tuesday.

Crude has remained above $60 a barrel since late December, boosted by shrinking US stockpiles and a weaker dollar, extending an advance from June amid OPEC-led output cuts to clear a glut.

Goldman hiked its price forecast, saying the market is now likely balanced, joining other Wall Street banks including Morgan Stanley and JPMorgan in raising its outlook. Still, the rally’s an incentive for American drillers to pump more.

“There’s a tendency at the moment that the market wants to continue this bull run,” Will Yun, a Seoul-based commodities analyst at Hyundai Futures, said by phone. “Fundamentally speaking, there’s a high chance that the US will boost production and conflicts could also increase among OPEC nations if prices continue to surge.”

WTI for March delivery added as much as 50 cents to $66.30 a barrel on the New York Mercantile Exchange and traded at $66.10 at at 09:33. The contract rose 1.7% to $65.80 a barrel on Thursday. Total volume traded was about 40% above the 100-day average. Front-month futures are down about 0.1% this week.

Brent for April settlement was at $69.87 a barrel on the London-based ICE Futures Europe exchange, up 22c. The contract rose 76c to $69.65 a barrel on Thursday. The global benchmark crude traded at a premium of $4.05 to April WTI.

Goldman sees Brent crude reaching $75 a barrel over the next three months and will climb to $82.50 within six months. Its previous estimate for both time periods was $62 a barrel. The bank’s bullish outlook is driven by its revised demand forecasts, reflecting stronger economic growth in emerging markets.

US output surged above 10 million barrels a day for the first time in more than four decades in November, the Energy Information Administration reported on Wednesday.

Nationwide crude inventories climbed 6.78 million to 418.4 million barrels last week, the first increase in 11 weeks, according to the EIA. Meanwhile, production from the Organisation of Petroleum Exporting Countries in January added just 20 000 barrels a day.

Gasoline futures on the Nymex added 0.5% to $1.9003 a gallon. Front-month prices are down 1.9% this week, the first loss in about a month.

Oil-market news:

• Oilmen, wildcatters and refiners are reaping billions in windfalls from President Donald Trump’s new tax code, helping boost the staying power of old-style energy even as the world searches for cleaner fuels.

• ConocoPhillips has begun deploying the spoils of the oil price rally, announcing a dividend boost and share buybacks along with a $400m expansion in Alaska in its fourth-quarter earnings report.

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commodities  |  markets  |  oil
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