Goldman Sachs shifts WTI forecasts after sudden halt in glut of oil

Over the weekend analysts at Goldman Sachs bumped up their forecast for the price of West Texas Intermediate in the second half of 2016 from $45 a barrel to $50.

Multiple supply disruptions had led to a “sudden halt” in the market surplus, although excess supplies were expected to reappear in early 2017, analysts Damien Coruvalin and Jeffrey Currie.

As of 10:03 BST front month Brent crude futures are up by 1.665% to $48.64 per barrel on the ICE.

Supply disruptions resulting from wildfires in Canada or attacks by militants on installation in Nigeria's Niger delta were to blame.

However, some of the production lost would return, together with increased output from the US, North Sea, Iraq and Iran, cutting an estimated shortfall in supples during the second half of 2016 from a previously estimated 900,000 barrels to 400,000 barrels, they said.

“The physical rebalancing of the oil market has finally starte [the changes to forecasts] reflects our long-held view that expectation for long-term surpluses can create near-term shortages and leaves us cyclically bullish but long-term bearish.”

Goldman also lowered its price forecast for WTI in the first quarter of 2017 from $55 per barrel to $45 per barrel. Prices were seen recovering to $60 per barrel by year-end.

The broker also bumped its forecast for global demand in 2016 from 1.2m barrels per day to 1.4m bpd.

Goldman estimated supply disruptions over the past two weeks had cut production by between 1.5 to 2.0m bpd but had been largely compensated for by still ample inventory levels worldwide.

“The price recovery will remain anchored by near-term inventory shifts, with the oil market less forward looking than over the past two years.”