(Reuters) - Goldman Sachs raised its oil price forecasts for 2020, citing tighter-than-expected inventories after the Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed to deepen oil output cuts through the first quarter of next year.
“We are increasing our forecast for backwardation in 2020 although our long-term marginal cost forecast remains unchanged,” Goldman analysts wrote in a note dated Dec. 6.
The bank revised its Brent spot price forecast to $63 per barrel for 2020, up from a previous estimate of $60, while it also increased West Texas Intermediate (WTI) spot price outlook to $58.5 per barrel from $55.5.
Brent futures LCOc1 were down 0.3% at $64.19 per barrel, as of 0632 GMT, having risen sharply last week after OPEC and its allies agreed to deepen output cuts.
Oil producers led by Saudi Arabia and Russia, agreed on Thursday to cut output by an extra 500,000 barrels per day (bpd) in the first quarter of 2020 but stopped short of pledging action beyond March.
The decision, “crystallizes an important shift in OPEC+ behavior to managing short-term physical surpluses and deficits rather than trying to correct perceived long-term imbalances through open-ended commitments,” the Wall Street bank said.
The bank revised its supply-demand forecast, reflecting lower OPEC+ production path in the first half of 2020.
“These revisions lead us to forecast a broadly balanced 2020 global oil market, 0.3 million bpd tighter than our previous forecast.”
Goldman lowered its demand growth forecast by 50,000 bpd, citing prospects for a modest recovery in global growth, driven by higher consumer spending but a still-challenged manufacturing sector. The bank now projects its demand growth forecast at 0.9 million bpd and 1.2 million bpd for 2019 and 2020, respectively.
Reporting by K. Sathya Narayanan and Swati Verma in Bengaluru, Editing by Sherry Jacob-Phillips