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
- 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