 "A soldier patrols in front of the Opec headquarters in Vienna")
Opec's compliance with output cuts remained high even though the group's monthly report indicated a rise in global crude stocks and a production jump from Saudi Arabia, Goldman Sachs said on Tuesday.
Goldman said in a research note that market rebalancing is still progressing, and it saw demand for oil finally exceeding supply in the second quarter aided by production cuts, despite an expected rise in US shale output.
Opec on Tuesday reported a rise in oil inventories and raised its forecast for production in 2017 from outside the group. It said its biggest producer, Saudi Arabia, increased output in February by 263,000 barrels per day (bpd) to 10 million bpd.
That news sent US crude on Tuesday to its lowest settlement since Nov. 29, which was the day before Saudi Arabia led the Organization of the Petroleum Exporting Countries to cut supplies. Brent settled at its lowest since Nov. 30. [O/R]
"Our expectations that inventories will draw through 2017 therefore leads us to expect that Brent timespreads will continue to strengthen with the forward curve in backwardation by 3Q17," Goldman said in its research note.
Goldman said it was not in Opec's interest to extend output cuts beyond six months as the group's goal was to normalize inventories, and not to support prices.
The bank reiterated its base case that production cuts will be followed by new production highs.
"Combined to the shale ramp-up and greater visibility on the majors shifting focus to future growth, we see potential for long-dated oil prices to continue to decline below our $50 per barrel long-term price forecast."
