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(Reuters) – Goldman Sachs (GS.N) said it expects U.S. oil prices to hold in a $ 50 (34 pounds) a barrel to $ 60 (41 pounds) a barrel range through 2020, due mainly to improved shale oil productivity and increased supply from OPEC producers.
“We continue to have a long-term deflationary oil outlook driven by shale productivity, elevated OPEC supply and, in 2016-18, project start-ups,” the bank said in an equity research note dated May 20.
The typically bearish bank earlier last week raised its short-term price outlook as it said the market had flipped into a deficit due to production outages in Nigeria and Canada.
In the May 20 note, the bank estimated WTI oil prices would average $ 45 a barrel in 2016, from $ 38 previously, but cut its 2017 forecast to $ 53 a barrel from $ 58 earlier.
It forecast Brent at $ 45 a barrel this year, up from $ 39 previously, and at $ 55 a barrel in 2017, from $ 60 previously.
“Over the past year, shale productivity has been in line with our 3 percent to 10 percent estimates and we continue to see a $ 50-$ 60 per barrel range of prices through 2020,” it said.
Productivity gains through 2020 would “push average breakevens for shale plays below $ 50/bbl WTI.”
Goldman said the threat from a more efficient shale gas had spurred OPEC to maximise output, which could lead to increased supply from the cartel through the end of the decade and slight increases in Saudi Arabia’s oil market share.
(Reporting by Apeksha Nair in Bengaluru; Editing by Richard Pullin)
