By Peter Nurse
Investing.com - Oil prices gained Thursday, helped by the International Energy Agency taking a more positive stance over the market’s demand-supply imbalance.
AT 9:15 AM ET (1315 GMT), U.S. crude futures traded 2.7% higher at $25.98 a barrel, while the international benchmark Brent contract rose 2.8% to $30.01.
The outlook for global oil markets has “improved somewhat,” with demand a little stronger than expected and supply curtailed after the recent dramatic drop in prices, the International Energy Agency said.
“It is on the supply side where market forces have demonstrated their power and shown that the pain of lower prices affects all producers,” said the Paris-based agency. “We are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected.”
The IEA boosted its demand forecast for 2020 by 700,000 barrels a day, but this still means an annual drop of 8.6 million b/d, or about 9% from last year's levels.
On the supply side, the IEA noted the production cuts by the alliance of exporters led by Saudi Arabia and Russia, but added that by the end of 2020, U.S. production could be down 2.8 million barrels a day, three times the projected drop in Saudi Arabia’s output.
“Activity levels in the shale patch have dropped to record lows and nearly all operators have shut in uneconomic production,” the IEA said.
This followed data showing the first decline in official U.S. crude inventories since January last week.
Still, Goldman Sachs (NYSE:GS) doesn’t see much more room higher for oil prices as U.S. drillers will restart production if prices climb.
“We therefore maintain our summer price forecasts of $30/bbl Brent and $28/bbl for WTI,” said analysts at Goldman Sachs, in a research note, “especially given the still high demand uncertainty in coming months.”