https://www.reuters.com/article/us-global-oil-opec-goldman/goldman-sachs-still-sees-crude-prices-falling-after-opec-deal-idUSKCN21V07H
(Reuters) - Goldman Sachs said on Sunday that oil prices would continue
to fall in the coming weeks, reasoning that a “historic yet
insufficient” deal by major oil producers to cut output is unlikely to
offset a coronavirus-led demand rout.
The Organization of the Petroleum Exporting Countries (OPEC) and its
allies, a grouping known as OPEC+, said they had agreed to reduce output
by 9.7 million barrels per day (bpd) for May and June to stem a slump
in prices.
The bank saw downside risks to its short-term oil
price forecast of around $20 per barrel for Brent, but projected the
global crude benchmark would outperform U.S. oil because OPEC+
producers’ exports would likely fall, freeing up floating storage space.
Even with core-OPEC members fully complying with the cuts, and
50% compliance by all other countries that have agreed to curb
production in May, the voluntary cuts would translate into a reduction
of only 4.3 million bpd from first-quarter levels, the bank said.
A bigger output cut by G20 nations would also not help much, it said.
“Ultimately,
this simply reflects that no voluntary cuts could be large enough to
offset the 19 million bpd average April-May demand loss due to the
coronavirus.”
Both Brent futures, which slumped a record 65.55%
in the first quarter, and U.S. West Texas Intermediate (WTI) crude
posted tentative gains after the OPEC+ deal.
Goldman Sachs said,
however, that risks surrounding its 2021 price outlook of $52.50 per
barrel for Brent were “skewed squarely to the upside”, since the
“violent market rebalancing” will be followed by a sharp rebound once
demand picks up again.
Another Wall Street bank, Morgan Stanley, raised its oil price
forecasts, saying that while the OPEC+ deal will not prevent sharp
inventory builds in coming months, it would lead to stock reductions
from the second half of 2020 onwards.
Morgan Stanley raised its
third-quarter Brent and WTI price forecasts to $30 per barrel from $25,
and to $27.50 per barrel from $22.50, respectively. It likewise raised
its fourth-quarter outlook by $5 per barrel for both crude benchmarks,
to $35 for Brent and $32.50 for WTI.
Morgan Stanley projected demand to fall about 14 million bpd year-on-year in the second quarter.
Reporting By New York Energy Desk, and Arpan Varghese and Shreyansi Singh in Bengaluru; Editing by Himani Sarkar and Tom Hogue
Our Standards:The Thomson Reuters Trust Principles.
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