A number of factors are weighing on the global crude oil supply chain, including wildfires in Canada that disrupted major oil sands production in Alberta, pipeline attacks in Nigeria and outages in Venezuela. Consequently, Goldman projects production will remain below demand through the second half of the year.

Meanwhile, the bank believes global demand will grow by 1.4 million barrels a day in 2016, compared to 1.2 million predicted previously.

“The physical rebalancing of the oil market has finally started,” Goldman said, raising its U.S. crude price forecast for the second half of 2016 to $50 a barrel from $45 estimated in March.

Related: 32 Best ETFs to Track Crude Oil

However, the investment bank warned that a return of some output and higher-than-expected volumes from the U.S., the North Sea, Iraq and Iran could mean that the shortfall will be 400,000 barrels a day rather than the 900,000 previously predicted, and the bank expects a return to surplus in early 2017. It cut its forecast for the first quarter of 2017 to $45 from $55, but sees oil at $60 by the end of that year.

The changes to forecasts reflect “our long-held view that expectation for long-term surpluses can create near-term shortages and leaves us cyclically bullish but long-term bearish,” Goldman analysts added.

For more news and strategy on the Oil ETF market, visit our Oil category.

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