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Oil prices need to remain low to slow down US output: Goldman Sachs

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In a note released overnight, Goldman Sachs stated it saw a little upside to its $40 a barrel forecast over the next three months.

“Prices need to remain low in coming months to achieve a sufficient and sustainable slowdown in US production growth,” the bank said.

Related: Goldman Sachs on oil: US needs to cut, not OPEC

“The outlook for US production in 2016 in turn leaves risk to our $65 per barrel forecast as skewed to the downside.”

Surging more than 6 percent in US trading Monday, the price of oil has recently been on a wild ride. WTI futures for May are at $52.14 a barrel after reports from private firm Genscape indicated inventories in Cushing, Oklahoma, a storage hub, had fallen. But that spike followed an around 4 percent drop Thursday on expectations a pending deal with Iran could boost supplies significantly. Speculation that Cushing facilities would soon be full, sending more crude back onto the market has weighed on prices recently. Government data on supplies is released Wednesday morning.

Related: Oil prices have hope as supply & demand try to find market equilibrium

Goldman said that it expected US crude stocks to peak in April but that inventories would likely rise again by October, putting downward pressure on prices into 2016.

The bank said US output would grow by 700,000 barrels per day year-on-year in 2015, with a sequential quarter-on-quarter growth of 170,000 barrels per day in the fourth quarter of 2015, at the current rig count.


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Others also have similar outlooks on the futures of the commodity. Matt Smith, a commodities analyst at Schneider Electric, mentioned Tuesday on CNBC that he attributes the rise to a pent-up demand from the long holiday weekend, a weaker dollar, and the Genscape data.


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