Goldman Sachs, in a report released on November 30, says that the oil market is unnecessarily jittery, and that there was no need to worry about long-term oil supply.
At an OPEC and allied nations meeting on Thursday in Vienna, it was agreed that production limits would extend beyond the original March 31 expiry date until the end of next year.
According to the bank, OPEC and other allies including Russia are yet to finalize their plans to taper off the current curb on oil output by the end of 2018, but that they would review their shrinking inventories in June, and would be “agile and responsive” in the meantime.
Goldman Sachs says that the 9-month extension is meant to allay concerns around sharp increases in available spare capacity, which is already high – and rising.
The goal of the consortium of oil producing nations is to keep the 1.8 million bpd cuts in place from April 2018 through December 2018 so the stockpiles can return to their five-year average.
Oil prices jumped after global inventories fell over the past year, but there’s still a certain amount of risk from U.S. shale production ramping up.
Goldman Sachs sees OPEC’s assessment of the supply response for the medium-term as too conservative, and its own balance assumptions are far less aggressive than global inventory target levels.
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