OPEC supply cut deal to add as much as $10 to H1 2017 oil prices: Goldman

Goldman Sachs said the deal reached by OPEC crude producers on Wednesday to curb output should add $7 to $10 to oil prices in the first half of next year.

Members of the Organization of the Petroleum Exporting Countries (OPEC) agreed on Wednesday to modest oil output cuts in the first such deal since 2008, with group leader Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices.

“Strict implementation of today`s deal in 2017 would represent 480,000 to 980,000 barrels per day less output,” Goldman analysts said in a note dated Wednesday.

Goldman kept its end-2016 forecast for U.S. West Texas Intermediate crude (WTI) at $43 per barrel and its 2017 forecast at $53 per barrel.

WTI was trading around $47 a barrel, after gaining more than 5 percent on Wednesday on OPEC`s planned output cut.

“If this proposed cut is strictly enforced and supports prices, we would expect it to prove self-defeating medium term with a large drilling response around the world,” the Goldman analysts said.

Societe Generale analyst Michael Wittner termed the deal a “big surprise”, and said the agreement would be added to the bullish side of the ledger.

Oil futures retreated on Thursday as the market grew more skeptical on how OPEC would implement its plan to curb the group`s oil output.

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Source:Zeenews