Goldman says 'stellar' demand may fast-forward Opec's exit

[TOKYO] The Organization of Petroleum Exporting Countries's (Opec's) desire to clear the global oil inventory overhang may come sooner than expected, enabling the group to exit from its production cuts early, according to Goldman Sachs Group Inc.

Global stockpiles will remain below seasonal levels and continue to shrink through the second quarter of next year, said the bank. The market will have re-balanced by mid-2018, fast-forwarding Opec's exit from production cuts to the second half of the year, according to Goldman. It kept its forecast for Brent crude at US$62 a barrel.

Goldman is one of the most bullish banks for oil next year and this month boosted its price forecast for Brent, the benchmark for more than half the world's oil, on the producers' strong commitment to the cuts. Prices are on course for a second yearly gain after Opec and its allies last month agreed to extend supply curbs to the end of 2018 to shrink bloated inventories.

"The oil re-balancing continued its progress through November," driven by factors including "stellar"' demand growth, bank analysts including Jeffrey Currie said in a Dec 19 note. "Global inventories will have re-balanced by mid-2018, leading to a gradual exit from the cuts."

The bank forecast a market structure known as backwardation, which indicates concerns about a short-term scarcity of supplies, to strengthen further in the second quarter as OECD stockpiles reach and remain at five-year average levels. Brent futures rose 0.2 per cent to US$63.93 a barrel by 10.57am Singapore time, up about 13 per cent this year.

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