Oil price rises for second day Goldman Sachs OPEC remains strong despite increased production

International oil prices are rising for the second day as the Organization of Petroleum Exporting Countries (OPEC) and major oil producing countries have agreed to maintain their existing plans to increase production. Goldman Sachs argued that although OPEC+ has decided to continue increasing production, the risk of rising oil prices is growing.

Brent crude, a benchmark of international oil prices, rose 1.79% ($1.25) per barrel on the ICE Futures Exchange at noon on the 3rd (local time) to record $70.92.

Brent crude, which plummeted shortly after OPEC+ decided to maintain production increase the day before, turned to an uptrend in the afternoon of the previous day, up 1.16% to close at $69.67 a barrel. OPEC+ further said that “immediate adjustments can be made if necessary” and that “the meeting is ongoing”.

Oil prices rise for second day, Goldman Sachs

Goldman Sachs, which has been advocating the ‘oil supercycle’, issued a report and argued that “OPEC+’s decision has only the effect of lowering the oil price by about $1.5.” “The current low oil prices provide a ‘strong’ opportunity to enter a structural bull market, and OPEC’s decision to increase production only supports this view,” he said.

Goldman Sachs sees four reasons for OPEC+’s decision to stick with its plan to increase production. First, it explained that it is consistent with the previous decision to gradually expand supply. In addition, after oil prices soared to the highest level in seven years last month, it is interpreted that there is an aspect of easing tensions with major oil-consuming countries such as the United States. Third, the low oil price seems to have delayed the possibility of Iranian crude oil coming to the market as it reduced the need for the US and others to rush the Iran nuclear deal. Fourth, at the end of the year, US shale companies usually make investment plans for next year, but they analyzed that they took into account the fact that when oil prices are low, investment will decrease and the number of shale oil to be released in the future will decrease.

“If shale oil production slows down (as demand increases), idle production capacity will be exhausted faster as OPEC will have to increase production further,” he said. As such, OPEC+’s decision adds a very clear upside risk to Goldman Sachs’ forecast that Brent will hit $85 a barrel in the medium term by 2023.

However, in the short term, he pointed out that the crude oil market also needs more information about the micron mutation. It said that more information is needed on whether the supply will be short enough that the price of oil will exceed $80.

New York = Correspondent Hyunseok Kim

ⓒ, unauthorized reprinting and redistribution prohibited


Leave a Reply

Your email address will not be published. Required fields are marked *