A pick-up in disrupted production from Nigeria, Iraq and Libya in the second half of this year has the potential to move the global oil market back into surplus, Goldman Sachs said in a research note dated on Monday.
Given the instability in these countries, even a conservative assumption that only 100,000 barrels per day (bpd) of disruptions will come back online, leaves risks skewed toward higher output, Goldman said.
“As a result, we reiterate our view that the oil price and fundamental recovery remains fragile.”
Goldman said it continues to view oil as having weak near-term fundamentals, and is maintaining a price forecast at $45-$50 per barrel through next summer.
“A sustainable pick-up in disrupted production would lead us to lower our oil price forecast with WTI prices to average $45 per barrel,” the U.S. bank said in the note.
Goldman also said discussions of an output freeze by the Organization of the Petroleum Exporting Countries (OPEC) and a weakening dollar have been catalysts for the sharp upwards reversal in oil prices this month, but that neither factor will prove sufficient to sustain prices at current levels.
The investment bank said “thawing relationships” between parties in conflict in areas of disrupted production such as in Nigeria and Libya would be more relevant to oil rebalancing than an OPEC freeze.
Any move by OPEC to hold production steady would leave output at near-record highs in several member countries, and therefore do little to balance supply and demand.
West Texas Intermediate (WTI) crude futures have fallen 3.5 per cent over the last two days, after touching a seven-week high near $49 a barrel on Friday.
