Goldman Sachs sees OPEC+ deal as 'supportive', ups Brent forecast to $82/b

Quantum Commodity Intelligence – The OPEC+ deal that will see the 23-member producer group pump an additional 2 million bpd of crude by year-end is 'supportive' for oil markets, said US investment bank Goldman Sachs in a report following Sunday's meeting.

Goldman said that the 'moderate increase' in production will keep the market in deficit in the coming months, keeping the supply side 650,000 bpd below the bank's prior expectations for 1H 2022.

Additionally, Goldman also noted that the deal ends any threat of a price war between OPEC+ members.

"We view the deal as supportive to our constructive oil price view with supply increasingly becoming the source of the bullish impulse and evidence of non-OPEC supply shortfalls likely in the coming months," said the report.

As a result, the investment bank has upped its summer 2021 forecast by $2/b and 2022 forecast by $5/b.

However, Goldman also sees further volatility in the short-term and downside pressure as a result of ongoing Covid-19 travel restrictions.

"Oil prices may continue to gyrate in the coming weeks given growing concerns over the Delta variant and the slower velocity of supply developments relative to recent mobility gains."

Earlier in the year, Goldman Sachs was the first bank to forecast $80/barrel Brent for the third quarter. September futures recently hit a peak of around $78/b.

OPEC+ has agreed to increase production by 400,000 barrels per day each month going forward, theoretically until output is fully restored, but the group is expected to continue its regular meetings and match supplies with returning demand.

"The meeting resolved to adjust upward their overall production by 400,000 bpd on a monthly basis starting August 2021, until phasing out the 5.8 million bpd production adjustment," said OPEC in a statement Sunday.

As part of the deal, a number of producers will have baseline production levels revised upwards, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.

"All else equal, this represents $2/b upside to our $80/b summer and $5/b upside to our $75/b 2022 Brent price forecasts, although market focus on the Delta variant and higher (OPEC+) baselines will likely delay such price impacts," concluded the Goldman report.