EMEA News
Goldman Lowers Oil Price Projections as Crude Drops Again, but Bullish Sentiment Persists
As if to accentuate the persistent criticism that the Organization of the Petroleum Exporting Countries (OPEC) crude cutback extension formally agreed upon last week is not enough to alleviate the global glut, traders on Tuesday caused prices to drop yet again, with West Texas Intermediate settling down 14 cents to $49.66 and Brent down 35 cents to $51.94.
The drop was also caused by signs of an output resurgence in Libya, whose state-run National Oil Corporation on Tuesday said production will soon rise to 800,000 barrels per day.
Dominick Chirichella, senior partner at the Energy Management Institute, said the market "is now in the hands of how market participants interpret the weekly and monthly fundamental snapshots," and the only thing that will sway them is the OPEC agreement resulting in "a sustained inventory destocking pattern that will send global supply and demand balances back to normal historical levels."
Analysts are now hoping that prices will be supported somewhat by the U.S. summer driving season, which the American Automobile Association predicts will see a record 39.3 million motorists to travel 80 kilometres or more over the Memorial Day weekend.
Sensing that depressed prices may be with us for longer than OPEC boosters would care to admit,
Goldman Sachs had downgraded its price estimates for 2017, to an average $55.39 per barrel from $56.76 (for Brent) and to $52.92 per barrel from $54.80 (for West Texas Intermediate).
The bank stated in a note, "We believe we are in a lower for longer environment until there is greater evidence shale deliverability is surprising to the downside or OPEC runs out of spare capacity."
But Goldman analysts also noted that some have profited from the current market situation: it stated that oil companies such as Total, ENI, Galp, Lundin, and Tullow should be considered "winners" because "These companies hold a diversified portfolio of projects (at least two growth projects) that are above average on three key factors."
Meanwhile, the market wouldn't live up to its reputation for accommodating experts who forecast good times ahead despite fundamentals showing otherwise, and Tuesday's upbeat voice came from Leon Cooperman, CEO of Omega Advisors,who told CNBC that "oil prices currently under $50 could end the year closer to $60" due to the global economy projected to grow 3 percent or more and "supply and demand coming more into balance" - which has prompted his company to build positions in a variety of energy companies accordingly.
Cooperman is hardly alone in his assessment: earlier this week Helima Croft, global head of commodity strategy at RBC Capital Markets, and George Fink, CEO of Bonterra Energy, speculated that market conditions will likely result in crude averaging between $61 and $65 by mid next year.
