Goldman sees demand above output, oil rises to 6-mth high

Bloomberg

Oil climbed to a six-month high as Goldman Sachs Group Inc. said the market moved into a deficit earlier than expected due to disruptions in Nigeria and higher demand.
Futures rose as much as 2.1 percent in New York. The shift to a supply deficit this month happened one quarter earlier than forecast, Goldman Sachs said in a report. The bank raised its price forecasts, while also projecting a return to surplus early next year. Militant attacks and pipeline disruptions have cut Nigerian volumes by at least 30 percent, its petroleum minister said last week.
After falling to a 12-year low earlier this year, oil has rebounded on signs the worldwide glut will ease amid production cuts. The supply surplus in the first half of the year is proving to be smaller than estimated, the International Energy Agency said last week, citing robust demand in India and other emerging nations. Morgan Stanley, Barclays Plc and Bank of America Merrill Lynch joined Goldman Sachs in noting that supply losses are leading markets to rebalance.
“The oil market looks set on a course for rebalancing much faster than previously expected,” Barclays analysts Miswin Mahesh and Kevin Norrish said in a report. “Fresh catalysts in the form of large and extended supply outages in Nigeria are supporting upward price momentum in oil, just when it seemed about to fade.”

Goldman View
West Texas Intermediate for June delivery increased as much as 98 cents to $47.19 a barrel on the New York Mercantile Exchange, the highest since Nov. 4, and was at $47.04 by 11:34 a.m. London time. Total volume traded was about 5 percent below the 100-day average. Prices have climbed more than 75 percent from the February low.
Brent for July settlement increased as much as $1.07 to $48.90 a barrel on the London-based ICE Futures Europe exchange. The contract declined 25 cents to close at $47.83 on Friday. The global benchmark crude was at a premium of $1.06 cents to WTI for July.
Goldman increased its WTI price forecasts for the second quarter through the fourth, while raising its full-year 2016 projection to $44.60 a barrel from $38.40. There’ll be a more gradual decline in inventories in the second half than previously estimated and a return to a production surplus in the first quarter of 2017, with low-cost output continuing to grow, the bank said.
“The physical rebalancing of the oil market has finally started,” Goldman analysts Damien Courvalin and Jeffrey Currie wrote in the report dated May 15. “The market has likely shifted into deficit in May.”
Oil-market news
China reduced crude production in April by 5.6 percent from a year earlier to 16.6 million metric tons, the lowest level since February 2015, according to data from the National Bureau of Statistics. The decline rate was the most since November 2011.
Refining at Chinese plants increased 2.4 percent from a year earlier to about 10.93 million barrels a day last month. Rigs targeting crude in the U.S. fell to 318 after 10 were idled last week, Baker Hughes Inc. said.
The Organization of Petroleum Exporting Countries kept forecasts for global supply and demand unchanged in its last monthly assessment before members meet to review the market on June 2.