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Why Was Crude Oil Trading Higher on May 16?



Crude oil started the week on a positive note

Crude oil was trading higher on Monday on hopes that the supply glut will ease and the positive crude outlook from Goldman Sachs. At 3:20 PM EST, WTI crude oil futures for June delivery were trading at $47.80 per barrel, a rise of 3.4%. Brent crude was trading at $48.97, a gain of 2.4%.

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Goldman Sachs revised its crude oil outlook

In a research note released by Goldman Sachs, analysts Jeffrey Currie and Damien Courvalin wrote that the crude oil market is shifting towards a deficit from a near storage saturation situation much faster than previously expected. This shift is supported by the sharp decline in crude oil production along with improved demand. Goldman Sachs changed its crude oil outlook prices for 2016 and 2017. According to the fresh estimates, Goldman Sachs expects WTI crude oil to be at $45 per barrel in the second quarter of 2016, up from the previously forecasted price of $35. The bank also lifted its forecast price for the second half of 2016 from the previously forecasted $45 per barrel to $50 per barrel.

In the first quarter of 2017, the bank expects crude oil to trade below $45 per barrel, which is a decline from the previous forecast of $55. Prices are expected to reach $60 by 4Q17. The attacks on oil supplies in Nigeria as a result of geopolitical tensions dragged the country’s output to the lowest levels in the past 20 years. The supply disruptions along with the crude outlook from Goldman Sachs supported crude oil prices on Monday.

At 3:22 PM EST, crude oil producers Carrizo Oil & Gas (CRZO), Canadian Natural Resources (CNQ), British Petroleum (BP), and Total S.A. (TOT) rose 6.0%, 2.8%, 2.1%, and 1.7%, respectively. The SPDR S&P Oil & Gas Exploration and Production ETF (XOP) rose 2.1%.


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