Goldman Expects OPEC+ To Keep Output Stable At Next Meeting

Goldman Sachs expects OPEC+ to keep production quotas unchanged during the next meeting on 3-4 June, as the producer group first would want to observe the impact of the voluntary cuts that started at the beginning of this month, the bank said in a note.

• The bank sees a possibility that the producer group will officialise the voluntary cuts and broaden the cuts to smaller producers. Constraints on production of these smaller producers imply only a modest hit from a broader announcement to actual output but would signal strong cohesions amongst the group.
• Goldman forecasts major producers will keep current quotas as they are expected to first want to observe the impact of voluntary cuts.
• However, the bank sees a sizeable probability of around 35% that major producers could announce deeper cuts given falling crude prices well below the bank’s $80-85/bbl estimate of the OPEC price target.
• Supporting of additional cuts are the bank’s current forecasts suggesting that the market may have returned to deficits since the implementation of fresh OPEC cuts, and that inventories are likely to fall further in coming months without deeper cuts.
• Goldman also retains the view that Russia has not fully committed to its pledged output cut of 500kbpd.
• The bank believes that elevated OPEC pricing power should allow the group to deliver additional cuts after the next meeting in June, if oil prices were to remain below $80/bbl in H2.