Goldman worries about OPEC+ future ahead of output cut decision
As OPEC+ moves closer to extending restrictions on oil supplies, concerns are re-emerging about the organization’s future and the success of its attempts to rebalance the market while maintaining higher earnings and market share over the medium term, Goldman Sachs said in a policy note.
OPEC+ is scheduled to meet on November 30 and December 1 and is likely to discuss extending the agreed oil production cuts next year due to weak demand amid rising COVID-19 cases.
“The UAE’s desire to raise its own base quota, which seems low compared to the quota of Saudi Arabia and Russia, could potentially complicate the meeting, although we do not think that this will prevent the extension (of the restrictions),” Goldman wrote.
The bank views coordinated steps to limit production as the best short-term policy for oil prices, given high levels of crude oil inventories, the resumption of production in Libya and the return of partial lockdowns due to the new wave of the coronavirus pandemic.
Goldman expects OPEC+ to delay the production ramp-up by three months, which will help bring the global market deficit back to 1 million barrels per day in the first quarter of 2021.