OPEC+ is unlikely to respond with increased production to the U.S. calls amid the surging Delta variant, which is set to dampen short-term oil demand, Goldman Sachs says.
Earlier this week, the White House called on the OPEC+ group to increase oil production more than they had planned in order to tame rising gasoline prices that could derail the global economic recovery.
U.S. National Security Advisor Jake Sullivan said in a statement that “We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices.”
Higher gasoline costs, if left unchecked, risk harming the ongoing global recovery,” the statement further reads.
Commenting on the possibility that OPEC+ lift supply, Goldman Sachs analysts said in a Thursday note carried by Reuters: “We don’t see the recent White House statement as threatening the current market deficit nor the pace of the rebalancing in 2H21.”
As a result, the investment bank kept its forecast for Brent Crude prices at $80 a barrel at the end of this year. Brent was trading at around $71 early on Friday.
Goldman continues to be bullish on oil, although it expects the Delta variant surge to have a transitory drag on oil demand over the next two months.
China’s oil demand is expected to be 1 million barrels per day (bpd) lower in the next two months than previously expected due to the rising number of COVID cases in the world’s top crude importer, the bank said earlier this week.
“Looking beyond the Delta headwind, we expect the demand recovery to continue alongside rising vaccination rates,” Goldman Sachs said in the Thursday note.
“[W]e imagine that there will be quite a lot of reluctance from the Saudis and the broader group to increase output further, particularly given continued uncertainty over the spread of the delta variant,” ING strategists Warren Patterson and Wenyu Yao said on Thursday.
“We will need to see how much pressure the US is willing to put on Saudi Arabia in order to see them further opening the taps,” they added.
By Tsvetana Paraskova for Oilprice.com
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