Crude at US$35 is just right for US explorers, says Goldman
While oil prices at that level are above cash costs of production, they will deter a rebound in shale output from occurring too early
Singapore
OIL at US$35 a barrel is neither too high nor too low but just right to make shares of US explorers worth buying, according to Goldman Sachs Group Inc.
While prices of crude at that level are above cash costs of production, they will deter a rebound in shale output from occurring too early, the bank's New York-based analysts including Brian Singer said in a report dated April 6. Oil at US$30 to US$35 a barrel should keep the behaviour of US companies unchanged and help lift West Texas Intermediate (WTI) to US$55 to US$60 a barrel in 2017, according to Goldman. "We view our second-quarter 2016 oil outlook as an idealistic Goldilocks scenario," the analysts wrote in the report. "We would use volatility to add to positions of shale productivity winners and the next rung down."
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