nsucurrent.com May 20, 2018

United States oil prices extend gains on compliance with output cuts

02 February 2018, 09:13 | Ruby West

Goldman Sachs now estimates Brent will reach US$75 a barrel over the next three months and will climb to US$82.50 within six

Goldman Sachs now estimates Brent will reach US$75 a barrel over the next three months and will climb to US$82.50 within six

OPEC pumped 32.4 million barrels per day (bpd) in January, the survey found, up 100,000 bpd from December.

Just over half of USA crude comes from shale fields that include the Permian Basin in West Texas and he Eagle Ford shale in the South Texas.

Prices are up for a third day on Friday, supported by a Reuter survey that showed strong compliance with production cuts by OPEC and other major producers including Russian Federation.

Brent April crude futures were up 53 cents on the day at 69.42 dollars a barrel by 1150 GMT, while NYMEX crude for March delivery rose 42 cents to 65.15 dollars a barrel.

The result is that more oil is being produced with far fewer rigs and drilling teams.

USA commercial crude oil inventories increased by 6.8 million barrels from the previous week: for the first time in almost three months. The number of oil drilling rigs increased by 12, or 1.6 percent, to 759 units.

However, Goldman expects the price to dip again as USA shale producers pump more oil to benefit from the price reaction to lower global inventories.

The bank now estimates Brent will reach Dollars 75 a barrel over the next three months and will climb to USD 82.50 within six months, analysts including Damien Courvalin wrote in an emailed report.

The investment bank revised up its forecast for demand growth in 2018 and forecast that oil prices could rise to $82.50/b by mid-year.

The environment for investing in commodities is the best since 2004-2008, Goldman Sachs said on Thursday, saying it expects returns of 15 percent over the next six months and of 10 percent over the next year. America's decades-old crude export ban was lifted in late 2015 by Congress and the country is now shipping out about 1.7 million barrels a day to foreign markets, more than triple the 500,000 barrels exported at the end of 2016. WTI prices were about $60 a barrel in January 2018.

Barrel is the unit of measurement of oil volume. This essentially canceled out the export cut by Saudi Arabia (albeit, a swap of heavier crude for lighter barrels - a key theme in the global crude market).

Yet, increasing output from the USA may threaten rising prices.

The decline in products in the world's largest economy could be indicative of demand and help drive sentiment that the market is moving closer to balance.

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