Goldman Sachs says Doha oil talks failure bearish for prices
Bloomberg with the headline comments from GS on the Doha oil talks
- Doha oil talks failure bearish for prices
- Failed Doha talks don't imply OPEC output will recover
- Kuwait output fall to support Brent, Dubai timepsreads
Nothing further at this stage
Added ... more detail:
- ... we view this outcome as bearish for oil prices given consensus expectations for a "soft guidance" freeze at January production levels.
- This lack of an agreement does not imply that OPEC production will recover in the short-term, as the year-to-date stabilization owes to ongoing disruptions and maintenance rather than coordination.
- ... the weekend also saw the start of Kuwait's oil worker strike, which according to Bloomberg has led to crude production falling to as low as 1.1 mb/d from 2.85 mb/d in March, which is significant and can lend further support to the recent strength in Brent and Dubai timespreads
- The level of the actual disruption remains uncertain as the latest comments of the oil sector spokesman were of unaffected oil exports and of production rates gradually improving with normal levels "not far off"
- this strike may be short lived (it is a labor dispute and not a disruption), ongoing OPEC production disruption, gradually declining non-OPEC production as well as planned maintenance in the face of resilient oil demand in 1Q have recently pointed to improving oil fundamentals
- This leaves the market reaction early this week as uncertain, with risks skewed to a sharp sell-off only should the Kuwait disruption prove much smaller than suggested so far. Either way, we believe that the weekend headlines will further support the already high level of price volatility.
- Beyond the end of disruptions and maintenance, there remains potential for higher production than we forecast from several OPEC members
- Iran, the Neutral Zone and Libya could potentially provide additional production growth in coming months, with vessel tracking over the past two weeks pointing to rising Southern Iraq and Iran exports
- We expect Saudi production to only rise to 10.35 mb/d during 2Q-3Q16 ... We therefore view risks to our Saudi forecast as skewed to the upside: it is at the guidance provided by the deputy crown prince in his latest interview with Bloomberg this week, with such volumes presented as contingent on a deal to freeze production being reached.