Goldman Sachs: OPEC deal will add $10 a barrel to oil prices

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Goldman Sachs Group Inc. published a report dated September 28 forecasting a $10-a-barrel increase of oil prices after OPEC’s agreement to cut crude production. At the same time it remains skeptical on how the decision will be implemented by the group.

Goldman is sure that the decision of OPEC members to reduce the output to a range of 32.5 million to 33 million barrels a day is likely to increase global oil prices “at least in the short term” as any move of the Organisation that produces more than 40 percent of world’s crude oil would definitely have a great influence on global supply and demand balances. Still Goldman’s crude forecast for the remainder of 2016 and the next year is not changed.

“Strictly implemented in the first half of 2017 and all else constant, the production quotas announced today should be worth $7 a barrel to $10 a barrel to the oil price,” Goldman analysts say. “It has historically taken a fall in oil demand to ensure quota compliance, as in that case, production is forced lower by a decline in refinery intake around the world. This is not the case today with resilient demand growth.”