Oil gushes as Goldman Sachs sees glut vanishing

Oil climbed to a six-month high as Goldman Sachs said the market moved into a deficit earlier than expected following supply disruptions in Nigeria and an increase in demand.

The shift to a supply deficit this month came one quarter earlier than forecast, said Goldman Sachs in a report.

The bank raised its price forecasts, while projecting a return to surplus early next year.

Militant attacks and pipeline outages have cut Nigerian volumes by at least 30%, its petroleum minister said last week.

“There are a lot of disruptions out there and as a result crude production is down,” Michael Wittner, the New York-based head of oil-market research at Societe Generale said.

“Nigeria is the big one right now. There are also disruptions in Libya, Venezuela, and a number of other places.”

After falling to a 12-year low in February, oil has rebounded on signs the global glut will ease amid production cuts.

The supply surplus in the first half of this year is proving to be smaller than estimated, the International Energy Agency said last week, citing robust demand in India and other emerging nations.

Morgan Stanley, Barclays, and Bank of America joined Goldman Sachs in noting that supply losses are leading markets to rebalance.

Brent crude for July settlement rose $1.17, or 2.5%, to $49 a barrel on the ICE Futures Europe exchange, the highest level since November 4.

The gain in futures bolstered equities. Commodity companies accounted for eight of the biggest gainers on the S&P 500 Index.

The S&P 500 Oil & Gas Exploration and Production Index climbed as much as 3.6% at one stage.

“The physical rebalancing of the oil market has finally started,” Goldman analysts Damien Courvalin and Jeffrey Currie wrote in the report.