Goldman Sachs Lowers U.S. Shale Growth Forecast
October 23, 2019
The API reported yesterday that crude stocks were up 4.5 million barrels and the crude stocks at Cushing, Oklahoma were up 2.0 million barrels. Gasoline stocks were down 702,000 barrels and distillate stocks were down 3.5 million barrels.
The average estimates for today’s DOE inventory update from the Bloomberg survey are for crude stocks to be up 2.397 million barrels. Gasoline supplies are called to be down 2.107 million barrels. Distillate stocks are called to be down 2.712 million barrels.
The events of the last month may have begun to have some impact on energy inventories around the world. Reports have said that Very Large Crude Carriers (VLCC) are headed to the US to lift more crude as the Saudi Arabian attacks have cut into light crude supplies globally. OPEC’s production cuts are also being mentioned as impacting supplies and China has increased their import quotas creating more demand for crude. Will the market begin to see some drawdowns as a result of these things?
Goldman Sachs on Tuesday lowered its forecast for growth in US shale production for 2020, as well as, slightly reducing its outlook for global demand growth in 2020. The investment bank said it expects shale oil production to grow by 700,000 bpd in 2020, down from its previous forecast on a 1 million bpd increase and the expected 1.1 million bpd increase in 2019. Goldman also reduced its forecast for global demand in 2020, by 100,000 bpd to 1.3 million bpd.
Reuters reported that according to four sources, when the OPEC + group meets in December the production group will consider deeper oil production cuts due to expected weak demand growth for 2020. In addition, Saudi Arabia and its Gulf allies are looking for other members of the group to demonstrate better compliance to production quotas since the Gulf oil producers have been shouldering much of the production cutbacks.
Supportive to prices is reports that China’s crude oil imports rose by 10.8% in September from September 2018 due to strong fuel demand and refinery profit margins. China imported 10.4 million bpd in September from 9.93 million bpd in August according to Customs data. In September of 2018, China imported only 9.05 million bpd of oil. For 2019, China oil imports are up 9.7%.
The energy market continues to be stuck in a trading range and looking for some news or event to give it a push out of its range. Could a big build in crude stocks in today’s DOE report help to push the market lower? Most traders and analysts seem to think we get a build on today report but there are a few looking for a bigger build than forecast and it that does happen it could help produce a sell off.