Goldman Sachs on Sunday said an extension of the joint OPEC and non-OPEC oil production cut is not warranted unless supply and demand fundamentals deteriorate.
The Organization of the Petroleum Exporting Countries (OPEC) and other major producers should be wary of extending the cuts unless there is a weakening of global oil demand or output from Libya or Nigeria increases, the bank said in a note from analysts led by Damien Courvalin.
"Our assessment of oil fundamentals and the rationale behind the production cuts do not warrant, in our view, such an extension barring either a sharp deceleration of demand growth or a sharp rebound in Libya/Nigeria production," the bank said in March 26 note.
"We believe that the rebalancing of the oil market is in fact making progress despite the record high U.S. crude inventories."
After a meeting on Sunday in Kuwait, a joint committee of ministers from OPEC and non-OPEC oil producers agreed to review at its next meeting in April whether the global pact to limit supplies should be extended by six months beyond its expiration at the end of June.
Goldman Sachs said that while it is beneficial for low cost crude producers to accelerate "the normalization" of oil inventories, they should not target huge price rebounds.
"Oil prices above $60 per barrel would prove self defeating in our view given the flattening of the oil cost curve and the unprecedented velocity of the shale supply response," the bank said.
Oil prices dipped on Monday as rising U.S. drilling activity outweighed the possibility that the production cut would be extended.
© Reuters News
0 comments:
Post a Comment