New glut possible by 2019: Goldman Sachs

New production could result in a repeat oil supply glut in 2018-2019, Goldman Sachs said on Tuesday as oil prices slid on growing US inventories.

“2017-19 is likely to see the largest increase in mega-projects’ production in history, as the record 2011-13 capex commitment yields fruit,” the investment bank said in a note quoted by Reuters.

Rising US crude inventories have also heightened short-term volatility in oil prices.

Brent futures for May delivery dipped for a second consecutive day on Wednesday, down a little over 1% to USD 50.31 per barrel at 11.31am London time, after the American Petroleum Institute reported on Tuesday that non-commercial US stocks were up 4.5 million barrels last week, considerably higher than the 2.8 million barrels expected by analysts.

Goldman previously projected last week that the current glut could disappear by Q2 of this year on OPEC’s continued compliance with the production-cut deal reached last November, but rising US shale production and other projects that could together add an extra 1 million bopd have continued to serve as a wild card in longer-term forecasts, the bank added.

Despite recent talk of an extension of the deal between OPEC and non-OPEC producers, which saw them pledge to remove some 1.8 million bopd from the global supply, many analysts have remained sceptical, pointing to the fact that the compliance of Russia and other non-OPEC members with their commitments has remained patchy.

“We think it is very unlikely that Russia will actively take part in any extension of the production cuts that goes beyond paying lip service to the agreement,” Commerzbank said in a note quoted by Reuters.