Crude Up 4.1 Percent as Goldman Insists Oil Market is Robust

Friday March 15, 2019

While Friday put an end to crude's daily winning streak due to a return of fears that the global economy will weaken and American production is skyrocketing, U.S. oil ended the week 4.1 percent higher, and Brent was up 1.9 percent.

And even though traders once again proved on Friday that sentiment can send them down a bearish spiral, Goldman Sachs is holding to its earlier convictions that the market for crude is exceedingly healthy and prices will climb substantially in the near future.

West Texas Intermediate settled down 9 cents at $58.52 per barrel, and Brent  settled down 7 cents at $67.16 per barrel.

Summarizing Friday's performance was Phil Flynn, an analyst at Price Futures group: "The market is taking a pause as it tries to digest mixed reports that give us different ideas of future supply and demand."

While trying to make sense of these mixed messages (which are helped along by dramatic media headlines that often don't reflect the messages themselves) may be near impossible, Goldman Sachs in a note on Friday blew apart the notion in many analytical quarters of oil demand weakening by stating that demand in fact grew by 1.55 million barrels per day (bpd) in January alone, a strong result despite a tough comparison with high consumption last year.

Goldman expects demand for the first quarter of this year to grow by nearly 2 million bpd, obliterating its earlier forecast for 1.1 million bpd and driven by consumption in emerging markets; as for worry over China demand waning, Goldman added that oil consumption in that country actually grew by 340,000 bpd in January and February.

The bank concluded that the world's thirst for oil will result in Brent prices being pushed above $70 per barrel and perhaps even the wrath of U.S. president Donald Trump may not be enough to change their trajectory.

While Goldman was overt in its positive assessment of the crude market, the International Energy Agency - which has routinely made gloomy proclamations about the health of the commodity, on Friday inadvertently deflated a fear that has occupied the minds of many analysts: Venezuela.

Even though media headlines pegged the agency as being concerned that the Bolivian republic's recent electricity crisis could trigger "serious disruption" to the oil market, the IEA pointed out that the Organization of the Petroleum Exporting Countries (OPEC) was sitting on 2.8 million bpd of spare production capacity, and "Therefore, in the event of a major loss of supply from Venezuela, the potential means of avoiding serious disruption to the oil market is theoretically at hand."