Goldman Says $90 Oil May Push OPEC+ Into Faster Output Ramp-Up

With Brent oil prices having surged to around $90 per barrel, OPEC and its allies may announce a bigger-than-expected rise in output, according to Goldman Sachs Group Inc.

The outcome of Wednesday’s meeting remains “evenly balanced” between a hike of 400,000 barrels a day for March and a bigger increase, the Wall Street bank said.

“We view growing potential for a faster ramp-up at this meeting, given the pace of the recent rally and the likely pressure from importing nations,” analysts including Damien Courvalin, Callum Bruce and Jeffrey Currie wrote in a report. “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.”

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Goldman said such a move by OPEC+ would result in a short-term blip for crude prices and wouldn’t change the bank’s bullish view. The rapid decline in Covid-19 cases, strong demand so far in 2022 and initial earnings from U.S. producers “all reinforce our conviction in the need for sharply higher prices,” the bank said.

Brent crude climbed 0.2% to $89.42 a barrel by 3:09 p.m. in Singapore, extending this year’s gain to 15%.

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Despite oil’s jump, OPEC+ must weigh a number of factors that could weaken prices, according to Goldman. There’s renewed speculation about more releases from the U.S. Strategic Petroleum Reserve and natural-gas-to-oil substitution may ease as the northern hemisphere’s winter ends. There’s also been progress with the Iranian nuclear talks, which could lead to a lifting of sanctions on the Islamic Republic’s oil.

“Growing odds of a potential return of Iran exports would likely argue against a large increase in output” from OPEC+, the analysts wrote.