Oil: Market will shift into deficit by 2H17 – Goldman Sachs

Michael Cahill, Research Analyst at Goldman Sachs, shares his take that the increased likelihood of an OPEC cut motivates GS’s near-term forecast upgrade.

Key Quotes

“Stronger than expected demand growth and lower production from high-cost countries increase our confidence that the global oil market will shift into deficit by 2H17 even with OPEC production above current levels. Thus, there is now a stronger incentive for OPEC producers to halt inventory growth in 1H17 and normalize the current high level of inventories with a short-duration production cut. We think a cut should generate backwardation – helping OPEC grow market share by sidelining higher-cost producers – and reduce oil price volatility – increasing the valuation of their debt and equity.”