Goldman Sachs Says Extended OPEC+ Cuts Bring Bullish Price Risks

(Bloomberg) -- The decisions by OPEC+ leaders Saudi Arabia and Russia to extend voluntary oil production cuts through to the year-end brings bullish risks to crude's outlook, according to Goldman Sachs Group Inc.

• The moves reflect the group's “unusually high pricing power,” analysts Daan Struyven, Callum Bruce and Yulia Zhestkova Grigsby said in a Sept. 5 note
• There's ~$2/bbl upside risk to Goldman's Brent December 2023 forecast of $86/bbl from a 500kb/d miss in Saudi supply in 4Q relative to the bank's estimated balances
• In addition, the extended curbs highlight the risk to bank's assumption that OPEC+ countries will in January reverse half of the 1.7m b/d cut that was announced in April 2023
• Under a bullish scenario — which is not Goldman's base case — in which OPEC+ keeps the 2023 cuts in place through end-2024, and where Saudi Arabia raises output only gradually back to 10m b/d, $14/bbl would be added to forecast for Brent at $93/bbl in Dec. 2024
• Still, the producer group is “unlikely to pursue Brent prices well and sustainably above $100/bbl given its focus on medium-run stability”
• READ: Oil Tests November High After OPEC+ Leaders Extend Cuts
• READ: Saudi Oil-Cut Extension Sets Up Much Tighter Finale for 2023
• READ: Goldman Says Oil Market Has ‘Large Deficit' on OPEC+ Cuts

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