BCS Barclays PLC

Oil prices climbed Monday as Goldman Sachs said that the market is now in shortfall, boosting a sector that has suffered from a severe glut for almost two years.

The global crude benchmark Brent was up 1.6% at $48.59 for July cargoes while West Texas Intermediate was up 1.5% to $46.91 for June deliveries.

Goldman Sachs said that the recent outages from large producers such as Canada and Nigeria had sent the oil market from nearing full storage levels to being in deficit.

Goldman Sachs has been among the most bearish of banks on the price of oil. It still predicts tough times ahead for the sector, saying that low-cost oil producers could push the market back into surplus by early 2017.

The bank remains relatively negative on price, forecasting $45 oil by the first quarter of 2017 and $60 a barrel by the end of that year.

New production outages in Nigeria, caused by attacks on infrastructure, are likely to continue supporting the oil price in the short term. They come just as concerns over supply in Canada are starting to fade as its oilfields restart following shutdowns caused by wildfires.

These disruptions to supply are taking oil out of the market just as Iran is pumping more crude, said Barclays, which predicted the outages to last throughout this month and perhaps longer.

Still, the biggest driver in the oil price is an uptick in global demand, not supply, Barclays said. A mild northern hemisphere winter had sapped energy consumption, but strong demand from China and India are now providing support for oil prices.

"The most significant upward revisions to demand have been made in China, where the effect of the government stimulus package has improved what was a very weak picture for diesel demand," Barclays said.

Chinese independent oil refiners, known as "teapots," are driving some of that demand, with even the world's major oil producers now offering to supply cargoes. The global oil pricing agency Platts reported Monday that the Saudi Arabian Oil Company, known as Saudi Aramco, was loading a cargo of crude oil that will eventually be delivered to independent Chinese refiner Shandong Chambroad Petrochemicals Co. That would be the first delivery to that market from a major oil producer.

Nymex reformulated gasoline blendstock—the benchmark gasoline contract—rose 1.1% to $1.61 a gallon. ICE gasoil changed hands at $426.75 a metric ton, up $8 from the previous settlement.

Georgi Kantchev contributed to this article

Write to Kevin Baxter at Kevin.Baxter@wsj.com

(END) Dow Jones Newswires

May 16, 2016 08:35 ET (12:35 GMT)

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