Goldman Sachs said the collapse of OPEC+’s oil output talks have introduced uncertainty into the group’s production path, while maintaining its view of $80 a barrel Brent price for this summer and gradual increase in output early next year.
Ministers of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, called off oil output talks on Monday and set no new date to resume them, after clashing last week when the United Arab Emirates rejected a proposed eight-month extension to output curbs.
Oil prices soared to multi-year highs on Tuesday bolstered by the stalemate.
“The differences between both parties seem surmountable as they agree on ramping-up production into year-end with the still high uncertainty for 2022 oil balances making a pledge to any long-term commitment unnecessary today,” the bank said in a note.
OPEC+ had agreed on record output cuts of almost 10 million barrels per day (bpd) last year, as the pandemic hit.
Goldman maintained its view for a gradual increase in production in the second half this year, followed by similar increases in production in the first quarter of 2022 to finally bring the fall in inventories to an end.
Also given its forecasts for rising demand, slow global production recovery and a decline in productive capacity it expects the UAE, Saudi and Russia to bring production to or near quarterly average records, helping meet all their preferences.
“While the threat of a new OPEC+ price war is no longer negligible, its negative price impact would be dampened by a global market starting in a 2.5 mb/d deficit and in need of an extra 5 million bpd in production by year-end to avoid critically low inventories,” Goldman added.