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Goldman Sachs Lifts 2018 Crude Price Outlook on Saudi, Russian Resolve to Cuts

9:40 AM, Dec 5, 2017 — Goldman Sachs raised its outlook for oil prices in 2018 on expectations of tighter crude inventories next year after Russia and Saudi Arabia signalled stronger-than-expected commitment to cuts at last week’s meeting of key oil producing nations.

The investment bank sees Brent and West Texas Intermediate 2018 spot forecasts at $62 a barrel and $57.50 a barrel, it said in a note on Tuesday. Forecasts for 2019 are $59.50 a barrel and $55 a barrel. Prior projections for both years were $58 and $55.

“OPEC and non-OPEC participants to the production cuts agreed last week to extend their cooperations until year-end 2018, with a goal of normalizing inventories,” said Goldman analysts including Damien Courvalin and Jeffrey Curie.

“The press conference featured comments on remaining ‘agile and responsive’ to the progress of the rebalancing, as we expected, but the resolve exhibited by Saudi and Russia nonetheless exceeded our expectations,” they said in the note.

Countries from the Organization of the Petroleum Exporting Countries, or OPEC, have put caps on their production in a bid to curb the glut of global crude supplies that helped send prices tumbling to multi-year lows. Still, output in the US has risen as shale producers stepped up their efforts.

Goldman said by 2019, they see shale and other producers responding to the higher prices, incentivizing “OPEC and Russia to pare back their now greater spare capacity, leaving risks skewed to the downside.”

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