Goldman Sachs says future oil price will rise

Goldman Sachs said oil prices are likely to be higher in the future due to a recovery in demand and a decline in crude oil production, and expects European integrated oil companies to struggle to sustain the current level of production.

Goldman, however, said it expects Royal Dutch Shell, BG Group and Norway’s StatoilHydro to be exceptions, as they have the best production growth over the coming five years. It rates all the three stocks “buy.”

“StatoilHydro is in our view the best European integrated play on our bullish view on the oil price, given its greater sensitivity (both in terms of cash flow and net income) to oil price changes,” Goldman said in a note to clients. It expects the European integrated oils sector to suffer due to lack of major new projects and potentially poor delivery.

Goldman said 2010 to 2013 is likely to see a dramatic acceleration of non OPEC oil production decline, with annual production losses of up to 1 million barrels per day.

“We believe oil equities and the oil price are close to breaking out of the narrow trading range seen over the past three months. The key catalyst, in our view, will be evidence that global oil demand has returned to positive year-over-year growth,” Goldman said.

It maintained its “attractive” view on the European oil integrated sector, while keeping its “neutral” stance on exploration and production companies. Goldman upgraded the European refining sector to “neutral” on the back of increased diesel demand, supported by higher economic activity in 2010.

Tags:  Goldman Sachs, oil price