Investment bank Goldman Sachs , on Friday, December 16, revised its crude oil price forecast for the second quarter of 2017 on the back of a decision by OPEC members and other countries to cut production amid growing demand from consumers.
The investment bank has spiked its oil price outlook for the second quarter of 2017 to $57.50 a barrel from $55 a barrel for U.S. West Texas Intermediate crude. It also raised its price forecast for international benchmark Brent crude to $59 a barrel from $56.50 a barrel.
The investment bank’s December outlook for U.S. crude however remains at $50 a barrel as a potential ramp up in oil production from Libya and a stronger dollar limit the near-term upside.
As for the much hyped production cuts by OPEC and major non-OPEC producers, there will be “little evidence” of the cuts until mid to late January, when they will be the “next catalyst for the next large move in prices”.
“Ultimately,our work on Saudi Arabia’s fiscal balance suggests that the kingdom has a strong incentive to cut production to achieve a normalisation of inventories,even if it requires a larger unilateral cut, consistent with comments last weekend by the energy minister.
Given this incentive to cut and in light of the OPEC and non-OPEC cuts announced over the past two weeks, we are slightly raising the 1H17 production declines that we project from the participating producers,” the Goldman analysts wrote.
They expect 84 percent compliance to the announced collective cuts of 1.6 million barrels a day, Reuters reports.
