Oil production disruptions may be hitting multi-year highs, but Goldman Sachs predicts the resulting price recovery is likely to stall.
"On aggregate, we view the price recovery as fragile," Goldman Sachs said in a commodities research note published Wednesday.
The bank explained that the restart of Canadian production, prospects of a solution to Nigerian outages, larger-than-expected output from OPEC members, and the risk of smaller-than-expected production declines as result of higher crude prices are likely to temper price gains going forward.
A month's worth of wildfires in Canada's oil producing province of Alberta and continued rebel attacks on Nigeria's oil infrastructure helped push up oil prices as disruptions hit multi-year highs, with over 3.5 million barrels per day taken offline in May alone, according to Goldman's data. Weather issues and dwindling funds have also knocked Venezuelan oil production by about 85,000 barrels per day (bpd) year-to-date through to the end of May, it added.
But with Canadian disruptions expected to end by late June, and negotiations between rebels and the Nigerian government underway, the price driving effects of production interruptions could start to dissolve.