Investment banking firm Goldman Sachs said on Tuesday that OPEC+ may announce a bigger-than-expected rise in output due to Brent oil prices’ increase to around $90 per barrel, as cited by Bloomberg. The outcome of either an expected hike of 400,000 barrels a day for March versus a bigger increase following Wednesday’s OPEC meet remains ‘evenly balanced,’ the bank said.
Analysts Damien Courvalin, Callum Bruce and Jeffrey Currie of Goldman are view a growing potential for a faster ramp-up at this meeting, given the pace of the recent rally and the likely pressure from importing nations.
“The producers’ group may also be growing more concerned by the hawkish central bank shift that could lead to slower global growth and oil revenues later this year,” Goldman’s analysts added.
The firm added that any increase by OPEC and its allies would result in a short-term blip for crude prices and does not alter the bank’s bullish outlook. Earlier this year, Goldman predicted Brent prices at $90 per barrel in Q1 2022, $95 in the second quarter, and $100 per barrel in the last two quarters.
The general decrease in Covid-19 cases, especially as the impact from the Omicron variant was smaller than expected, solid demand build so far in 2022, and initial earnings from US producers reinforce the conviction for the need for distinctly higher prices, Goldman said, according to Bloomberg.
However, while oil prices continue to surge, Goldman warned that OPEC must continue to consider a multitude of factors, including the progress of Iranian nuclear talks and a resumption of the JCPOA agreement, which could lead to sanction relief and an influx of Iranian crude. The bank also pointed to renewed speculation surrounding more releases from the US Strategic Petroleum Reserve, and natural gas-to-oil substitution easing as winter ends in the norther hemisphere, as further factors for the group to consider.
Brent crude is currently priced at over $88 a barrel, extending out this year’s gains. The benchmark briefly increased to $90.02 a barrel last month, a seven-year record.