OPEC+ may decide on Wednesday to announce a larger production increase for March than the usual 400,000 barrels per day, considering the oil price rally to $90 and the potential for renewed discontent from major oil importers at these high price levels, Goldman Sachs said in a Tuesday note.
“We view growing potential for a faster ramp-up at this meeting, given the pace of the recent rally and the likely pressure from importing nations,” Goldman Sachs analysts including Damien Courvalin, Jeffrey Currie, and Callum Bruce, wrote in the note carried by Bloomberg.
According to the investment bank, the odds of the outcome of the February 2 monthly OPEC+ meeting remain “evenly balanced” between the usual 400,000-bpd increase in production for the following month and a larger production hike.
“The producers’ group may also be growing more concerned by the hawkish central bank shift that could lead to slower global growth and oil revenues later this year,” the strategists at Goldman Sachs wrote.
Despite the potential of a higher-than-expected output increase that could depress oil prices, the Wall Street bank remains very bullish on oil, as strong demand so far this year, falling COVID cases, and U.S. oil producers’ earnings “all reinforce our conviction in the need for sharply higher prices,” says Goldman Sachs as quoted by Bloomberg.
Oil prices could hit $100 this year and rise to $105 per barrel in 2023, on the back of a “surprisingly large deficit” on the oil market now due to the much milder and potentially briefer impact of Omicron on oil demand, the bank said last month.
Even if OPEC+ announces a larger increase in production on Wednesday, the market will be closely looking at how much of that increase its members can actually deliver, considering that half of them have lagged in ramping up output to their quotas so far, while more producers—with few exceptions such as Saudi Arabia and the UAE—will be struggling to raise production at an even faster pace.
By Tsvetana Paraskova for Oilprice.com
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