Declines in U.S. oil inventories and capex may boost prices modestly in the near term, but production growth will remain too strong for substantial gains, Goldman Sachs said.
"While the decline in the U.S. rig count has been faster than we expected, it remains insufficient in our view to balance the U.S. market in 2016," Goldman said in a note dated Monday. "Prices need to stay low for longer to achieve a sufficient and sustainable slowdown in U.S. production growth."
The aggressive capex and activity cuts may offer some modest upside to its $40 a barrel forecast over the next three months, but the risk to its longer-term $65 a barrel forecast is to the downside, Goldman said.
Oil prices have taken a wild ride recently, surging more than 6 percent in U.S. trade Monday, with WTI futures for May delivery at $52.14 a barrel after reports from private company Genscape showed inventories in Cushing, Oklahoma, a physical storage hub, had fallen. But that spike followed an around 4 percent drop Thursday on expectations a pending deal with Iran could boost supplies significantly. Speculation that Cushing facilities would soon be full, sending more crude back onto the market has weighed on prices recently. Government data on supplies is released Wednesday morning.