Goldman Forecasts Decline in Global Oil Inventories

The rebound in US drilling activity has exceeded expectations.The rebound in US drilling activity has exceeded expectations.

Goldman Sachs expects global crude oil stocks to keep falling due to production cuts and strong growth in demand, although stocks are likely to rise in the United States.

"We do not view the recent US builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness," analysts at the bank said in a note dated Feb. 21, Reuters reported.

"Given our unchanged 1.5 million barrels per day growth forecast for 2017, this higher base demand level should fully offset higher US output."

The Wall Street bank reiterated its forecast for Brent and US crude prices to rise to $59 and $57.50 per barrel respectively in the second quarter, before dropping to $57 and $55 for the rest of 2017. Oil prices held near multi-week highs on Wednesday, with the US West Texas Intermediate April crude contract up 18 cents at $54.51 a barrel, while Brent crude was up 24 cents at $56.90. 

Surging US output has pushed crude and gasoline inventories to record highs, keeping a lid on prices after they climbed following an agreement by the Organization of Petroleum Exporting Countries and other producers to cut output by about 1.8 million barrels per day.

"While the production cuts have so far reached a historically high level of compliance at 90%, the rebound in US drilling activity has exceeded even our above consensus expectations," Goldman said.

However, the increase in US drilling points to factors including further improvement in shale productivity and funding for the industry, rather than expectations of an increase in prices, the bank said.

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