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Goldman Sachs on oil and OPEC+ meeting – a deal might support the oil price, but only briefly

Goldman Sachs on the OPEC+ meeting Thursday 9 April 2020 and what a Saudi, Russia deal on output cuts means.

Analysts at GS are not bullish on prospects for the deal nor on oil prices afterwards.

  • Our updated 2020 global oil balance suggests that a 10 mb/d headline cut (for an effective 6.5 mb/d cut in production) would not be sufficient, still requiring an additional 4 mb/d of necessary price induced shut-ins
  • Larger headline cut of close to 15 mb/d, would be much harder to achieve – the incremental burden would likely need to fall on Saudi Arabia to be effective

But

  • any support prices receive from a deal … will soon give way to lower prices with downside risk to our near-term WTI $20/bbl forecast

GS cite the evaporation of demand being too overwhelming for supply cuts to have much impact:

  • size of the demand shock is simply too large
  • which sets the stage for a severe rebalancing

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