|20 March, 2020

OPEC supply curbs, U.S. measures could support oil prices near term -Goldman

U.S. crude oil prices rose more than $1 on Friday, extending steep gains from the previous session

Image used for illustrative purpose. An employee demonstrates a sample of crude oil in the Yarakta Oil Field, owned by Irkutsk Oil Company (INK), in Irkutsk Region, Russia in this picture illustration taken March 11, 2019. Picture taken March 11, 2019.

Image used for illustrative purpose. An employee demonstrates a sample of crude oil in the Yarakta Oil Field, owned by Irkutsk Oil Company (INK), in Irkutsk Region, Russia in this picture illustration taken March 11, 2019. Picture taken March 11, 2019.

REUTERS/Vasily Fedosenko/Illustration

Supply restraint by core-OPEC producers could push second-quarter Brent oil prices up to $30 a barrel, while U.S. measures to support the market could underpin prices in the near term, Goldman Sachs said in a research note.

Citing Wall Street Journal reports that the United States was considering intervening in the ongoing Saudi-Russian price war and Texas regulators may curb oil output, the U.S. investment bank said such action would reduce global and U.S. domestic supplies.

U.S. crude oil prices rose more than $1 on Friday, extending steep gains from the previous session, after U.S. President Donald Trump said he would "get involved" in the price war at an "appropriate time".

While any U.S. measures could support the oil market into the second half of the year, however, Goldman Sachs said accompanying supply cuts would still not be enough to offset the 8 million barrels per day (bpd) demand loss - brought about by countries slowing economic activity to halt the spread of the coronavirus which has caused nearly 10,000 deaths worldwide.

"Medium-term, the impact of such policies will depend on their political viability given the upcoming presidential election," Goldman Sachs said in the note issued on Thursday.

U.S. production quotas could create a $5 to $10 upside to Goldman Sachs' West Texas Intermediate price forecast of $40 to $45 a barrel in 2021, the bank said.

While a return to U.S. oil supply management policies of the 1970s and 80s would "help support prices in the third and fourth quarter above our $30 and $40 a barrel Brent forecast, they would simply replace OPEC's arti?cial price support policy with another," the bank said, referring to the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is a key member.

(Reporting by Shreyansi Singh in Bengaluru; Editing by Christopher Cushing) ((Shreyansi.Singh@thomsonreuters.com; +91 8061823666/3590 (If within U.S. call +1 646 223 8780); Reuters Messaging: Shreyansi.Singh@thomsonreuters.com))

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