Goldman Sachs Commodities Research raised its forecast for the price of Brent crude for the second and third quarters by five dollars a barrel, after OPEC and its allies kept their agreement to cut supplies unchanged. He said, “The discipline of shale oil producers” is likely behind the group’s slow increase in production.
In a note, the bank said it now expects Brent prices to reach $ 75 a barrel in the second quarter and $ 80 a barrel in the third quarter of 2021.
Shale oil producers in the United States have rapidly reacted to oil price gains in recent years, winning market share as Saudi Arabia and other major producers cut production, but have been reluctant to boost production since demand was devastated by the pandemic last year.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed to extend most of the crude production cuts until April, after they decided that the demand recovery from the Coronavirus pandemic is still fragile.
Goldman said: The OPEC supply strategy works. We believe that it is now clear that OPEC is in fact pursuing a tight oil market strategy, while our updated supply and demand balance indicates that the (stocks) of the Organization for Economic Cooperation and Development (OECD) countries are falling to their lowest levels since 2014 by the end of this year. ”
The bank cut its forecast of OPEC production by 0.9 million barrels per day over the next six months, and said that supplies from shale oil and non-OPEC will likely remain severely inflexible towards prices until the second half of 2021, allowing OPEC to rapidly rebalance the oil market. The bank said the main issue would be “a possible reaction to shale supplies, but the latest earnings season indicates that investors are still far from compensating for growth.”