Goldman Sachs Sees 'Upside' to Oil Price Forecasts From OPEC+ Deal

EghtesadOnline: US investment bank Goldman Sachs said the OPEC+ agreement to boost oil supplies supports its view on oil prices and expects a modest “upside” from its summer forecast for Brent to reach $80 a barrel.

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21 July 2021

OPEC+, made up of the Organization of the Petroleum Exporting Countries, Russia and other producers, agreed on Sunday to ramp up oil supplies from August to cut prices that have risen to 2-1/2 year highs, Reuters reported.

“The agreement had two clear focuses: a moderate increase in production that will keep the market short in the coming months, as well as guidance for higher capacity that will be needed in the coming years given growing underinvestment,” Goldman Sachs said.

Goldman said the deal is in line with its view that “OPEC should focus on maintaining a tight physical market, while directing it towards higher future capacity and discouraging competitive investment.”

The OPEC+ deal represents an “upside” of $2 a barrel from the Brent price forecast of $80 a barrel for the summer and a $5 increase from the forecast of $75 a barrel for next year, said Goldman.

Brent crude was down 61 cents, or 0.8%, at $72.98 a barrel, after falling to $72.35 earlier in the session. US oil was down 66 cents, or 0.9%, at $71.15 a barrel, having slipped to $70.64 earlier.

With most of the expected surge in demand in the summer already accomplished and with increasing headwinds from the Delta Covid-19 variant, Goldman said the catalyst for the next leg of higher prices is shifting from demand to supply. with upside risks to price predictions in the coming months.