Crude Pauses After Excellent Week
Despite racking up strong gains this week, the future for crude prices may not be all that bright. A Goldman Sachs report released this week predicted that Brent crude would hover around the $60 level in 2020 if there were no significant energy shocks. The report also lowered its forecast for crude demand for 2019 and 2020. With oil supplies continuing to outpace demand, OPEC members will feel pressure to reduce demand in order to boost prices. Kuwait, which is OPEC’s four-largest producer, said that it is considering cuts to its oil production target. Other OPEC members are also feeling the pinch of low oil prices and will want to see lower production targets.
Crude Remains Sensitive to EIA Inventories
The Energy Information Administration (EIA) crude inventories report has proven to be a reliable leading indicator for crude prices. WTI futures jumped 2.8% on Wednesday, in response to a surprise deficit in U.S. crude stockpiles. The EIA reported a deficit of 1.7 million barrels last week, compared to an estimate of 2.5 million. This marked the highest one-day gain since mid-September, since the huge gain of 12.8% on September 16, after the attacks on Saudi oil fields triggered a huge rise in crude prices. Still, the trend has pointed to surpluses in recent weeks, and another surplus in next week’s release could push crude prices lower.