Goldman Sachs’ commodity analysts are a merciless bunch. Just the other day they warned that if OPEC fails to agree on a freeze, crude oil prices will dive back to
Now, the same analysts have released a report saying that Russia’s oil output will hit 11.7 million bpd in 2017, an upward revision of a previous estimate that claimed average daily output would be nearer to
It’s a bit strange that the investment bank’s analysts were this surprised, given that earlier this year, Goldman Sachs said Russia’s oil companies can remain free cash flow positive at any price above
Goldman wasn’t the only one surprised. The International Energy Agency (IEA) said back in July that Russia’s output was bound to fall to 10.94 million bpd this year because of oil transportation challenges. The challenges included pipeline capacity that would be insufficient to handle all the production from new fields.
It seems that the local E&Ps were able to overcome these challenges, because in its latest Oil Market Report, the IEA
There’s too much surprise when there should be none, and Goldman Sachs analysts are aware of it. It was they who
The wider implications of Goldman’s forecast revision are simple: the likelihood of OPEC agreeing to any sort of production freeze or even cut is getting slimmer by the hour. Russia has been guarded in its promises, basically repeating again and again that it’s all for a freeze, but not offering any details as to how it would take part in a freeze. Russia’s noncommittal commitment is wise, given that there appears to be a shortage of OPEC members ready to fall on their own sword, the absence of which renders Russia’s “willingness” to freeze production itself an empty promise.
And as Goldman Sachs prudently pointed out, even if the cartel does what now seems next to impossible, the small cut being proposed is unlikely to have much of an effect on the market, aside from the fact that as soon as an agreement is announced prices will spike. This spike will be temporary, as those OPEC members that have been exempted from the freeze negotiations will waste no time increasing their output to reclaim any market share left wanting.
Libya and Nigeria together last month added 800,000 bpd to OPEC’s total, Bloomberg
Over the last week, Russia
By Irina Slav for Oilprice.com
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