Goldman Says Oil Glut Will Persist Regardless of Freeze Talks Outcome

Some experts have maintained that oil prices in the $40s or even lower is not necessarily a bad thing

Despite the wave of speculation about what will happen during the impending freeze talks, Goldman Sachs warns that the global oil glut will continue regardless, and it estimates that returning supply from Iraq, Libya, and Nigeria "would be more relevant to the oil rebalancing than an OPEC freeze,"

If the "conservative" estimates of 100,000 bpd of supply returning from those nations is exceeded by 500,000 bpd of additional supply, the bank says it would reduce its average 2017 price forecast for U.S. crude from the current $52.50 projection to $45 per barrel.

The news is accompanied by a disclosure that investor reaction to rumours surrounding the freeze talks has resulted in a bear market that has grown "at the fastest pace in over a year", according to Bloomberg.

The Commodity Futures Trading Commission reports that during the week ended September 20 money managers increased their short position in West Texas Intermediate by 50,558 futures and options, while bets on rising prices dropped for a fourth week - said to be the longest stretch of declines in 14 months.

Following a now familiar pattern, yesterday both Brent and WTI reversed most of their Friday losses, ending Monday up around 3 percent at $45.93/bbl for WTI and $47.35/bbl for Brent, to keep prices firmly in the $40-$50/bbl range.

However, some experts have maintained that prices in the $40s or even lower is not necessarily a bad thing; Emma Richards, senior oil and gas analyst at BMI Research, reiterated that position on Monday by arguing it will be better if prices remain lower for longer, in order to allow for a proper market rebalancing.

She told CNBC's Street Signs, "We've seen massive reductions in the cost curve in U.S. shale, so there's a lot of capacity there that could be ramped up relatively quickly if prices recover too quickly or too strongly."

As for the freeze meeting itself,  Michael Lynch, president of the Strategic Energy & Economic Research, said in reference to over 800,000 barrels per day of crude scheduled to be added into the market this month, "They need to do something soon."

But John Kilduff, founding partner of Again Capital, still thinks it will be a non-event: "The rhetoric around the meeting is ringing hollow; what they say and do are completely different since they continue to increase production."

Earlier this month, Jim Ritterbusch, president of Ritterbusch & Associates, noted that crude futures are taking on an increasingly bearish appearance and pointed out that with regards to WTI "this can potentially expedite our expected trip south to the $39 area."