According to Goldman Sachs..
By Yee Kai Pin – Dec 14, 2010 4:15 AM GMT+0100
A drop in OPEC spare production capacity will signal a “second stage” in the oil market’s recovery, lifting crude higher than $100 a barrel by the second half of 2011, according to Goldman Sachs Group Inc.
The Organization of Petroleum Exporting Countries will supply more oil, reducing its spare capacity, as global inventory levels “normalize” from an overhang cause by the recession, the bank said in its 2011 commodities outlook dated yesterday. The 12-member group, which pumps about 40 percent of the world’s crude, said at a Dec. 11 meeting it will maintain production targets at levels agreed in December 2008.
“Inventories have declined rapidly in recent months as global demand growth has accelerated to one of the highest levels on record,” Goldman analysts led by London-based Jeffrey Currie said in the report. “We expect global demand growth to remain strong at over 2 million barrels a day.”
Oil has risen 11 percent this year on speculation the global economic rebound will boost fuel consumption. The International Energy Agency, in its monthly report Dec. 10, upgraded its demand forecast for next year, citing gains in North America and China. Futures for January delivery on the New York Mercantile Exchange traded at $90.76 a barrel on Dec. 7, the highest since October 2008, and were above $88 today.
OPEC members with formal output quotas, which excludes Iraq, produced 26.7 million barrels a day last month, 1.9 million more than targeted, according to data compiled by Bloomberg. Nigeria, Iran and Angola exceeded their quotas the most in volume terms.
“As OPEC spare capacity is drawn down through the second half of 2011, we expect the market to begin to transition back to a structural bull market, with WTI crude oil prices rising back above $100 a barrel,” the analysts wrote.
Goldman Sachs, in yesterday’s report, predicted West Texas Intermediate crude, the benchmark grade traded in New York, will rise to $89 a barrel within three months, $100 within six months and $105 within a year. Oil last traded above $100 in October 2008 as commodities and equities fell following the collapse of Lehman Brothers Holdings Inc.
The first stage in the oil market’s recovery started with the decline in inventories, the bank said.Crude stockpiles in the U.S., the largest oil-consuming nation, declined earlier this month to 355.9 million barrels, according to the Energy Department. That’s 9.8 percent above the five-year average, down from more than 13 percent two months ago.
Supplies probably dropped 2.6 million barrels in the week ended Dec. 10, based on the median estimate from 11 analysts surveyed by Bloomberg News before the department’s weekly report tomorrow.