Crude oil prices are likely to remain steady around current levels, as growing macro uncertainties, rising US output, and large availability of core Opec nations’ spare capacity will offset supply constraints from Iran and Venezuela, according to Goldman Sachs.
The US spooked markets worldwide with oil supply worries last month after it reimposed trade sanctions on Iran, one of the major global oil suppliers, bringing focus back on Opec.
Crude markets posted their biggest monthly losses in six months in May amid stalling demand and as trade wars fanned fears of a global economic slowdown.
“Escalating trade wars and weaker activity indicators have finally caught up with oil market sentiment,” said Goldman Sachs.
“The magnitude and velocity of the move lower were further exacerbated by growing concerns over strong US production growth and rising inventories,” it said.
Oil prices dropped to their lowest in three months yesterday, with Brent marking $60.55 per barrel and US crude reaching $52.11 per barrel.
“We expect oil prices to likely remain volatile in coming months around their current levels and our third quarter forecast levels,” the investment bank said in the note.
Increasing output from low-cost US producers will lead to persistent “backwardation”, lower oil prices, and tighter US crude differentials, it added.