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While many market participants view the recent talk of OPEC potentially raising oil production by as much as 1 million bpd as a bearish factor for oil prices, Goldman Sachs continues to be very bullish on oil, and thinks that OPEC not only needs to lift production, but it is mandatory that they do so.

“Everybody is all bearish about the recent announcement of a million barrels per day extra supply, but the market needed it. It not only needs it, it is mandatory. Otherwise you just drive the bus off a cliff,” Goldman Sachs’s Head of Global Commodity Research Jeff Currie said at the S&P Global Platts annual crude oil summit in London on Tuesday, as carried by MarketWatch.

Supply will not be enough to keep up with strong global demand and stockpiles will continue to drain in the second half of this year, even if OPEC were to boost oil production by 1 million bpd, according to Currie.

The United States has quietly asked Saudi Arabia and several other OPEC nations to raise oil production by some 1 million bpd, Bloomberg reported on Tuesday, quoting people familiar with the matter.

Concerns over a potential loss of some of Iran’s oil exports and the collapsing Venezuelan production supported an oil price rally for most of May, until reports emerged at the end of last month that OPEC’s largest producer Saudi Arabia and its key non-OPEC partner in the production cut deal, Russia, were talking about lifting the combined oil production of the countries from the pact by some 1 million bpd, potentially easing the cuts in response to supply concerns amid rising oil prices.

According to Goldman Sachs—which has been bullish on oil for a while despite the recent oil price correction—oil demand growth in China is “a lot higher than what anybody thinks,” Currie said.

By Tsvetana Paraskova for Oilprice.com

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