Goldman Sachs expects OPEC+ to make its final production hike in August at the now standard level of 411,000 barrels daily.
“Relatively tight spot oil fundamentals, beats in hard global activity data, and seasonal summer support to oil demand suggest that the expected demand slowdown is unlikely to be sharp enough to stop raising production when deciding on August production levels on July 6th,” the bank said in a note, as cited by Reuters.
OPEC+ on Saturday announced another 411,000-bpd production boost to its total for the month of July, following identical additions for May and June. The market reaction to the announcement was pretty much not worth mentioning because an escalation between Russia and the Ukraine drew traders’ attention to the issue of geopolitics and supply security, sending oil prices actually higher. Speculation that OPEC+ could add more than 411,000 barrels daily in July contributed to the lack of a market trader reaction.
In addition to its forecast that OPEC+ will stop adding supply after August, Goldman’s commodity analysis team also predicted that non-OPEC+ oil production will be growing later this year while global economic growth slows. This would be bearish for oil prices, and Goldman is sticking to its forecast of Brent crude at $60 per barrel this year and West Texas Intermediate at $56 per barrel. Currently, Brent crude is trading above $64 per barrel, and WTI is changing hands for over $62 per barrel.
Some commentators have seen in the OPEC+ hikes a desire on the part of Saudi Arabia to please President Donald Trump, who has been calling for cheaper oil. Meanwhile others have pointed out the annoyance in Riyadh with Iraq’s and Kazakhstan’s persistent overproduction, leading to the decision to boost supply, affecting these two OPEC+ members’ oil revenues.
By Irina Slav for Oilprice.com
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