On September 18, 2020, oil prices rose for a fourth consecutive day. The surge put crude on track for a weekly gain of around 10%; after Saudi Arabia pressed allies to stick to their production quotas. At the same time, banks like Goldman Sachs predicted a supply deficit which helped underpin the upward trend that is developing in the oil industry.
Brent crude was up by 18 cents to trade at $43.48 a barrel by 0756 GMT while U.S. oil futures CLc1 rose 17 cents to $41.14. Both of these contracts are set for their biggest weekly gains since early June after Hurricane Sally cut United States production; and OPEC together with its allies laid out steps to address the market weakness.
Goldman Sachs forecasted that the market would be in a deficit of about 3 million barrels per day by Q4 2020. The bank also reiterated its target for Brent to reach $49 by the end of this year and $65 by Q3 2021. Swiss bank UBS also said that there is a possibility of under-supply in the oil market. It predicted Brent would increase to $45 per barrel in Q4 2020 and $55 by mid-2021.
In the meantime, a tropical depression in the western part of the Gulf of Mexico might turn into a hurricane in the next few days which will potentially threaten more US oil facilities. The Saudi Arabian energy minister said that those who gamble on the oil prices would be hurt severely.
OPEC steps In To Salvage Oil
The Organization of the Petroleum Exporting Countries (OPEC) and other producers in OPEC+ agreed to cut 7.7 million bpd of output. The group insisted at a meeting on September 17 that it would take action against members who fail to comply with all the terms of the deal. RBC analysts said:
“We think (OPEC+) will put on hold plans to taper the cut down to 5.8 million bpd; … when the entire group convenes again in December.”
Turning to the Gulf of Mexico, the US offshore drillers and all exporters started a clear up on Thursday; after Hurricane Sally weakened to a depression. They began rebooting idle rigs after their closure for five days.