Goldman Sachs maintained its 2017 forecast of $58 a barrel for U.S. oil even after prices plunged on the lack of an agreement out of the global summit in Doha, Qatar, over the weekend. The investment bank also advised clients to pick up shares of energy companies, especially those that produce oil from shale, on Monday's dip.
"(We) maintain oil outlook post Doha no-decision. Still see a second half recovery," Goldman Sachs' energy analyst Brian Singer wrote in a note to clients Sunday. "Our base case expects sharp decline in non-OPEC supply, which we believe is on track."
Singer also reiterated his fourth quarter 2016 oil price target of $45 a barrel. The analyst believes IEA and country data show non-OPEC supply is already leaving the market due to low oil prices. He estimates a 0.7 million barrels per day reduction in U.S. oil production versus last year.
Moreover, Singer sees "recent green shoots" in China manufacturing and construction data, which may be a sign of better times ahead. First quarter oil demand was also 300,000 barrels per day better than expected, according to the analyst.
Consequently with supply likely to decline and demand showing signs of strengthening, oil prices should rise and be a tailwind for energy equities, according to the report.
Here are the Goldman Sachs "conviction list" energy stocks the firm recommends to buy on the dip.