February 10, 2017 [OPIS] - Oil investors shouldn't be overly concerned about those huge U.S. crude storage builds in 2017, Goldman Sachs told clients this week.
In fact, the investment bank now believes that it may have to raise its global demand growth estimates, and suggests that the “rebalancing” of oil markets may begin to show up in March.
High imports into the U.S. have been a clear fly in the bullish ointment Goldman has been using, but bank analysts believe that OPEC compliance to pledged cuts is up around 85%. Accordingly, lower output from Arabian Gulf countries may become manifest in lower U.S. imports in the next 47 days, reflecting the transit time from the Persian Gulf to the U.S. Gulf Coast.
“The rest of the world is already showing signs of tightness,” bank analysts note, but they stress that strength in WTI will lag Brent, and both benchmarks will lag Dubai. The January and early February builds simply reflect the output surge that occurred in the fourth quarter of 2016.
Demand is getting helped by the strongest global manufacturing PMI numbers (purchasing managers’ index) in six years. Goldman Sachs has kept its above-consensus forecast for global demand at 1.5 million b/d, but the elevated PMIs suggest that worldwide GDP growth could be 4.4%, and that would foreshadow a growth number close to 2.2 million b/d, which would accelerate the rebalancing.
