Goldman says oil at $35 is 'Goldilocks' ideal for US explorers

Oil at $35 a barrel is neither too high nor too low but just right to make shares of the US explorers worth buying, according to Goldman Sachs Group Inc. While prices of crude at that level are above cash costs of production, they will deter a rebound in shale output from occurring too early, the bank's New York-based analysts, including Brian Singer said in a report dated April 6. Oil at $30-35 a barrel should keep the behaviour of US companies unchanged and help lift West Texas Intermediate (WTI) to $55-60 a barrel in 2017, according to Goldman.

"We view our second-quarter 2016 oil outlook as an idealistic Goldilocks scenario," the analysts wrote in the report. "We would use volatility to add to positions of shale productivity winners and the next rung down."

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Goldman said it favours US producers EOG Resources, Diamondback Energy and PDC Energy as well as stocks in "the next rung down" - Hess Corp, Cenovus Energy, Anadarko Petroleum Corp, Encana Corp, Continental Resources and Whiting Petroleum Corp. While the bank predicts WTI crude oil prices will average $35 a barrel in the second quarter, it forecasts $38 for 2016 and $57.50 for next year.