Goldman Sachs Warns of Another Possible Oil Glut in 2018

Global investment banking firm, Goldman Sachs, had warned that another downturn in global oil prices could come over the next three years, sparked by a new wave of supply stemming from mega projects that were planned years ago.
It stated that these projects cost billions of dollars and take many years to bring online, and that many of them were initiated back when oil prices traded at $100 per barrel.
“2017 to 2019 is likely to see the largest increase in mega projects production in history, as the record 2011-13 capex commitment yields fruit. This long-lead-time wave of projects and a short-cycle revival, led by United States shales, could create a material oversupply in 2018-19,” Goldman Sachs said in a note.
Goldman identified a handful of projects in Brazil, Russia, Canada and the Gulf of Mexico that will reach completion and add to global supply between 2017 and 2019. It explained that combined with the new shale output, these projects could add another one million barrels per day next year to the global oil stock.
The investment bank also warned that the markets have become overly optimistic on oil prices since the Organisation of Petroleum Exporting Countries (OPEC) deal was announced nearly four months ago, adding that shale output could come in higher than expected this year, thus disappointing those expecting higher oil prices.
Similarly, reports indicate most European integrated companies are using a working assumption for their budgets that oil prices will average $60 per barrel in 2017, with an upper end bound of $80 per barrel between 2018 and 2020, all of which are in sharp contrast to Goldman’s projections of oversupply for the next three years.

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