Goldman expects an "uneventful" 3-month OPEC output cut extension
Dec 3 (Reuters) - Goldman Sachs said on Monday the Organization of the Petroleum Exporting Countries (OPEC) and its allies will likely extend its current output curbs through June, but expects the "uneventful" three-month extension to provide little support to prices.
OPEC and other global producers including Russia, a group known as OPEC+ have been cutting output by 1.2 million barrels per day (bpd) since January and had agreed to do so until March next year. The group will meet in Vienna this week and may potentially deepen the cuts by 400,000 bpd while extending them until June 2020.
"Already large speculative buying in recent weeks and some expectations for a longer/longer cut suggest that an uneventful 3 month extension is unlikely to provide much upside to current prices," the bank said in a Dec. 2 note.
"Absent new growth or geopolitical shocks, we therefore expect Brent to continue trading around $60 per barrel in 2020 with persistent backwardation."
The global oil supply demand balance requires an extension of the current OPEC+ cuts given the large increase in output from non-OPEC projects and an uncertain demand growth outlook, the bank said.
The extension is necessary to offset the 1.3 million bpd global surplus expected in the second and third quarter next year, which would cause prices to fall by about $7 per barrel without the cuts, it said.
Oil prices rose on Tuesday on expectations for OPEC+ to enact the deeper cuts for a longer period. O/R
(Reporting by Swati Verma in Bengaluru; Editing by Christian Schmollinger)
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