As OPEC+ oil producers gear up for their upcoming meeting, Goldman Sachs suggests the possibility of a more substantial group oil output cut. The Wall Street bank expects an extension of existing voluntary curbs by Saudi Arabia and Russia through at least Q1 2024. While the base case foresees maintaining the voluntary group cut, there’s a 35% subjective probability of major OPEC producers announcing a “deeper” group cut.
Precautionary Move Amid Uncertainties
Goldman Sachs sees this potential deeper cut as a precautionary measure against Brent prices dropping below $80 per barrel, particularly with weaker seasonal demand in Q1. The bank envisions a scenario where major OPEC+ producers, including Saudi Arabia, Russia, the UAE, Iraq, and Kuwait, might collectively implement a 0.5-1 million barrel per day cut through Q1.
Market Dynamics and Potential Outcomes: Goldman Sachs
While such a move could lead to a modest increase in oil prices, Goldman Sachs suggests the immediate reaction might be neutral or slightly downward in most other scenarios. It emphasizes the ongoing commitment of OPEC+ members, who have already pledged substantial output cuts in previous steps initiated in late 2022.
As OPEC+ nations prepare for a crucial meeting, Goldman Sachs outlines potential outcomes, highlighting the consideration of a deeper group oil output cut amid market uncertainties.