Goldman Sachs on the OPEC & non-OPEC oil production cuts
- Announced cuts are smaller than expected
- Implementation remains uncertain
- Nevertheless, the agreement removes the uncertainty surrounding participation of non-OPEC nations to OPEC reduction
Says Saudi Arabia has a strong economic and fiscal incentive to cut production
- Will help achieve a normalization of inventories ... even if it requires a larger unilateral cut
More:
- GS says that the cuts support the bank's H1 (2017) WTI price forecast of $55/barrel
- GS bases this forecast on effective 1m b/d cuts (vs. the announced 1.6m b/d ... GS says greater compliance to the 1.6 target is therefore an upside risk to price forecast)
- Better compliance than bank expects would initially lead to higher prices -- with full compliance adding $6/bbl to its price forecast .... but then there would be a bigger producer response (especially in the U.S. & this would eventually bring prices back to $55/barrel)
(in brief, via Bloomberg)
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Oil has had a good start to the week;
