Goldman bullish on oil despite Saudi Arabia-UAE deal

Goldman Sachs has reiterated its $ 80 price forecast for Brent crude despite reports that Saudi Arabia and the United Arab Emirates have reached an oil production deal that will extend the OPEC + deal until the end next year.

Crude oil fell after the Saudi-UAE deal was announced as uncertainty surrounding the future of the OPEC + deal and OPEC itself subsided. Still, the deal will mean more UAE oil will hit the market. It also means further pressure from the Emirates to increase production in the future.

However, later Wednesday, the UAE news agency wrote, quoting the Ministry of Energy and Infrastructure, that “deliberations between the parties concerned are still ongoing and an agreement has yet to be reached. “.

Earlier this month, the UAE blocked an OPEC + deal to increase oil production from August, making any deal conditional on revising the UAE’s ‘unfairly low’ benchmark from 2018. The UAE insisted on a higher baseline from which to calculate their quotas, as the figure did not reflect the country’s increased production capacity. The United Arab Emirates aims to increase its oil production capacity to 5 million bpd by 2030, compared to around 4 million bpd currently.

Now, if a deal is actually struck, the UAE will be allowed to increase its benchmark production level to 3.65 million bpd, but only when the current deal expires in April next year. This would represent an increase from 3.17 million bpd as the current production benchmark for OPEC’s third-largest producer.

Goldman has been one of the more optimistic banks on oil. It has remained at its $ 80 for Brent this year regardless of the latest developments. The bank still expects the oil market to sink into a deficit of up to 5 million bpd by the end of the year due to the strong rebound in demand we are already seeing.

“The magnitude of the coming change in the volume of demand – a change that the supply cannot match – should not be underestimated,” the investment bank said in April.

By Irina Slav for Oil Octobers

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