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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Goldman Sachs: OPEC+ Could Announce Larger Production Hike

  • Goldman: OPEC+ may decide on Wednesday to announce a larger production increase for March
  • Goldman Sachs: The odds of the outcome of the February 2 monthly OPEC+ meeting remain “evenly balanced” between the usual 400,000-bpd increase, and a larger production hike
  • Even if OPEC+ announces a larger increase in production on Wednesday, the market will be closely looking at how much of that increase its members can actually deliver

OPEC+ may decide on Wednesday to announce a larger production increase for March than the usual 400,000 barrels per day, considering the oil price rally to $90 and the potential for renewed discontent from major oil importers at these high price levels, Goldman Sachs said in a Tuesday note.

“We view growing potential for a faster ramp-up at this meeting, given the pace of the recent rally and the likely pressure from importing nations,” Goldman Sachs analysts including Damien Courvalin, Jeffrey Currie, and Callum Bruce, wrote in the note carried by Bloomberg.

According to the investment bank, the odds of the outcome of the February 2 monthly OPEC+ meeting remain “evenly balanced” between the usual 400,000-bpd increase in production for the following month and a larger production hike. 

“The producers’ group may also be growing more concerned by the hawkish central bank shift that could lead to slower global growth and oil revenues later this year,” the strategists at Goldman Sachs wrote.

Despite the potential of a higher-than-expected output increase that could depress oil prices, the Wall Street bank remains very bullish on oil, as strong demand so far this year, falling COVID cases, and U.S. oil producers’ earnings “all reinforce our conviction in the need for sharply higher prices,” says Goldman Sachs as quoted by Bloomberg.

Oil prices could hit $100 this year and rise to $105 per barrel in 2023, on the back of a “surprisingly large deficit” on the oil market now due to the much milder and potentially briefer impact of Omicron on oil demand, the bank said last month.

Even if OPEC+ announces a larger increase in production on Wednesday, the market will be closely looking at how much of that increase its members can actually deliver, considering that half of them have lagged in ramping up output to their quotas so far, while more producers­—with few exceptions such as Saudi Arabia and the UAE—will be struggling to raise production at an even faster pace.   

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Darrel Farris on February 01 2022 said:
    OPEC+ can announce a larger production increase, but they can&amp;amp;#039;t deliver the increase. The IEA has reported that OPEC+ only increased production by 210,000 bpd of the 400,000 bpd in January., the previous months were about the same.
  • Mamdouh Salameh on February 01 2022 said:
    It is very probable that OPEC+ will approve another 400,000 barrels a day (b/d) production increase for March in its meeting tomorrow in order to keep the global oil market balanced. But it won’t hesitate to increase production beyond 400,000 b/d if it thinks that market is overheating.

    This begs the question as to whether OPEC+ has the spare production capacity to deliver these production increases and my answer is that in the short term OPEC+ has enough capacity to keep the market balanced in 2022 and possibly 2023. Long term, it needs an expansion of capacity and this will take up to five years to achieve.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Darrel Farris on February 02 2022 said:
    OPEC+ can&#039;t fulfill the 400,000 bpd per month hike , why would they announce they are upping their hikes by more?

Leave a comment




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