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Goldman cuts 4th-quarter oil cost forecast by $7 on supply glut

Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016.    REUTERS/Nick Oxford/File Photo

Goldman Sachs (New york stock exchange:GS) on Tuesday slashed its 4th quarter 2016 oil cost forecast by $7 per barrel, stating a mounting crude surplus that may over-shadow any short-term cost support from the potential deal among top producers to limit output.

The Wall Street bank decreased its 4th-quarter West Texas Intermediate cost outlook to $43 a barrel from $50 a barrel.

“With this demand outlook unchanged, with year-on-year development of 1.4 million barrels each day, this leaves us now forecasting that inventories will build in 4Q16 by 400 kb/d (1000’s of barrels each day) versus. our prior expectation for any 300 kb/d draw throughout the quarter,” the financial institution stated inside a note.

It continued to state the forecast assumes a restricted additional rise in production from Libya and Nigeria of 90,000 barrels each day in comparison with current believed output.

Goldman stored its 2017 average cost forecast of $52 per barrel unchanged.

Oil futures fell as optimism faded to have an output-restricting deal from an oil producer meeting in Algiers which has to date unsuccessful to yield any agreement to curb among the worst supply gluts ever. [O/R]

“While a possible (oil producers’) deal could support prices for the short term, we discover that the opportunity of less disruptions but still relatively high internet lengthy speculative positioning leave risks skewed towards the downside into year-finish,” the financial institution authored.

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