My Contrarian Senses Are Tingling

Conformity is not for everyone. It's definitely not the way I approach life. So when I say I'm a contrarian at heart, I mean it in the most devoted way. Over the weekend, Goldman reduced its oil price forecast on the back of 1) higher supplies and 2) slightly lower demand.

On the supply side, Goldman points to higher production from Russia, Iran, and Venezuela. In our OMF last week, we wrote that even if US and Iran failed to agree to a new deal, our base case assumption should be to assume steadily higher production. Following multiple report confirmations soon after about the lack of an agreement, this is what our new oil market balance looks like.

Note: Assumption assumes Iran production returning to ~3.15 million b/d by year-end.

Now let's dive deeper into this balance. Goldman is not wrong in assuming higher Russian and Iranian production (Venezuela's production is not material enough to move balances). In our earlier forecast (start of the year), we had incorrectly assumed ~2.4 million b/d as the baseline for Iran. But if you look at our updated Iranian crude export chart from last week, you can clearly see a production increase since Q3 of last year.