OPEC may intervene, but oil will be above $80 this summer

The Organization of the Petroleum Exporting Countries (OPEC) and some of its allies will meet in Vienna on Friday to discuss increasing oil output, and while it is widely expected that they will increase production oil prices should remain high this summer, according to Goldman Sachs.

Brent crude oil rallied to about $80 a barrel in the spring amid a tightening market, but pulled back when it seemed apparent that OPEC would intervene. Now, the European oil benchmark is trading around $75 a barrel – but Goldman expects it will peak at $82.50 in the summer and will trade at $75 at yearend.

Goldman’s analysts expect core OPEC and Russian production to increase by 1 million barrels per day by yearend and by another half million barrels per day in the first half of 2019. But, these increases will be offset by supply disruptions in Venezuela and Iran.

"Our updated global supply-demand balance continues to point to further declines in inventories and higher oil prices in 2H18," Goldman Sachs said in a research note, adding, "We continue, however, to view the risks to this forecast as skewed to the upside, even if concerns over demand and higher OPEC production weigh on prices near term."

OPEC cut its production back in January 2017 to help work off a global oversupply that sent oil prices into a bear market.

U.S. crude oil climbed above a three-year high in May, of around $72 a barrel while it also pulled back amid signals that OPEC would ramp up output. While overseas oil producers have been exercising restraint, oil output in the U.S. has soared thanks to the shale oil boom.