Oil: No signal yet for price inflection – Goldman Sachs

While US oil inventories posted a large draw last week, analysts at Goldman Sachs find that high frequency oil data is not yet providing a clear signal for oil prices to move sharply out of their recent trading range.

Key Quotes

“As a result, we see symmetrical risks of higher or lower moves in the short term as data volatility continues to impact sentiment. We believe that sustained trends in inventory draws and US rig count declines or evidence of further OPEC actions will be required for prices to rally, which remains our base case with our 3-mo WTI forecast at $47.5/bbl.”

“Given the recent rebound in net speculative length from its 18-month lows, we believe, however, that a failure for these shifts to materialize soon could push prices below $40/bbl as the market tests OPEC’s and shale’s reaction functions. Importantly, we wouldn’t expect such a move to be volatile, as it is not driven by storage concerns like last year (with available storage capacity given the 2017 draws) but the ongoing search for a new equilibrium.”