Goldman Sachs sees less of a downside risk to oil prices from higher-than-expected inventories, noting that lower OECD commercial stocks could add US$2 to its end-2023 Brent outlook of US$86 per barrel.
OECD commercial stocks, which the Wall Street investment bank estimated were equal to about a third of the more than nine billion barrels of global stocks, were 30 million barrels lower in August than it had previously forecast.
"The main reason for oil outperformance is that the oil market continues to price sizeable deficits," Goldman analysts wrote in a research note on Tuesday, adding that draws tempered the bearish risk of what they previously called "persistently higher-than-expected inventories".
Goldman said higher refinery runs slashed US and Asia crude stocks by 21 million and 11 million barrels, respectively, since the end of June.
Together with a China-driven fall in non-OECD stocks by 50 million barrels this month, and a Saudi Arabia-led draw of 20 million barrels from stocks on water, global oil stocks saw a month-to-date decline of 80 million barrels.
Another bullish risk to prices from lower-for-longer Opec+ supply has grown with "Saudi's reiterated commitment to cuts and apparent willingness to extend and even deepen cuts", Goldman said.
"Saudi production could well stay its current low nine million barrels per day (bpd) level for longer if Saudi Arabia envisions a more aggressive price target."
Goldman said China demand news was mixed and suggested that weakness in macro data was concentrated outside the oil-intensive services sector while international jet demand was still recovering.
It also noted a bearish risk from higher Iranian supply, citing an estimated 500,000 bpd rise in exports through Aug 20.
