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Global crude oil supply uncertainties to test Brent at $70-$75/b for now: Goldman Sachs

Singapore — Uncertainties about future global crude supply are likely to test a forecast for Brent crude prices to trade between $70/b to $75/b over the next few months, Goldman Sachs said in a report.

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Loss of barrels from Iran and Venezuela as a result of US imposed sanctions and uncertainty around the ability for other producers to compensate for the losses have been sending mixed prices signals to the market, the bank said. While there are indications of an oversupplied US market, the seaborne crude market looks "increasingly tight."

"In the next couple months, this lack of clarity in oil fundamentals is likely to keep speculative buyers hesitant and oil price volatility elevated, testing the boundaries of our $70-75/b expected Brent trading range," Goldman said.

The front-month July ICE Brent futures contract as of 3pm Singapore time stood at $69.71/b.

The US last week decided to let sanctions waivers expire for Iran's biggest oil buyers, part of an effort to push Iranian crude exports to zero. Platts Analytics forecasts Iranian crude and condensate exports to fall below 500,000 b/d in the second half of this year, from 1.3 million b/d in the first quarter 2019.

Core-OPEC and Russia spare capacity is large but Saudi Arabia is likely to be reactive rather than pro-active in its ramp-up while Russia's pipeline exports are hampered by contamination, Goldman said.

"So while we believe that all these pieces will fall into place by this fall with rising Permian, core-OPEC and Russia production offsetting lower Iran and Venezuela production, we believe the key to prices in coming weeks will be the uncertain path to such a balanced oil market," the analysts said.

The Energy Information Administration on Tuesday raised its 2019 forecast for Brent spot orices by $5/b to $70/b, partly reflecting increasing supply disruption risks globally.

Crude oil production by OPEC will average 30.3 million b/d in 2019, down by 1.7 million b/d from 2018, EIA said. In 2020, EIA expects OPEC crude oil production to fall by 400,000 b/d to an average of 29.8 million b/d.

--Avantika Ramesh, avantika.ramesh@spglobal.com

--Ng Jing Zhi, jz.ng@spglobal.com

--Edited by Claudia Carpenter, claudia.carpenter@spglobal.com