Goldman cuts 2019 crude price view; sees recovery from current levels

Anna Jefferson
January 9, 2019

Brent for March settlement gained $1.32 to $58.65 on the ICE Futures Europe Exchange in London. That wrong-footed OPEC with Saudi Arabia and Russian Federation both pumping more than 11 million b/d at that time in a bid to offset the risk of lost Iranian barrels and left the market awash with crude. Data showed that stockpiles at Cushing, Oklahoma, a key delivery hub for USA crude futures, decreased by 565,000 barrels from December 3 to December 4, according to Genscape, a US global commodity and energy markets intelligence firm. The global benchmark crude traded at an US$8.66 a barrel premium to WTI for the same month. On Friday, crude oil futures ended up $0.87, or 1.9%, at $47.96 a barrel, extending gains to a fifth successive session.

"If compliance by OPEC and the allied non-OPEC countries is similarly high as in the agreement two years ago, the oil market is likely to be rebalanced during the first half year", Commerzbank wrote in a note on Monday.

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The aim of the OPEC cuts is to rein in a surge in global supply, driven mostly by the United States, where daily oil production grew by almost a fifth to over 11 million bpd in 2018. Oil refiners in the world's top crude-importing region are racing against the clock to restart and ramp-up purchases from Iran before U.S. President Donald Trump has a chance to change his mind.

Crude oil prices were slightly down at the start of trading on Tuesday, despite reports that Saudi Arabia cut its crude exports to help boost prices.

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Rising optimism on a potential US-China trade deal continues to morph into extra oxygen for the risk-associated complex, in turn pushing prices of the American reference for the sweet light crude oil to fresh multi-day peaks in levels just shy of the $50.00 mark per barrel. -China trade tensions. The company's shares dropped 10 percent after the disclosure.

"When stock markets are strong oil usually follows suit", PVM Oil Associates strategist Tamas Varga said. Though it will enjoy a portion of support from the lower oil prices, the comprehensive economic growth across the world may slow down significantly, resulting in tumbling market conditions. However, global oil markets have largely discounted the cut so far, since it appears to not be enough to offset record production levels by the U.S., Russian Federation and Saudi Arabia that have been producing oil at reactant levels, with both the U.S. and Russian Federation breaching the 11 million b/d production point.

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Brent crude has risen by around $4 since the cuts came into force on 1 January.

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