Goldman Sachs analysts have deemed the recent OPEC+ meeting as bearish, citing plans to phase out extra voluntary production cuts as a key factor.
Despite extending multiple layers of production cuts, including 2 mb/d of group cuts through 2025, 1.66 mb/d of voluntary cuts through 2025, and 2.2 mb/d of extra voluntary cuts through the third quarter of 2024, Goldman Sachs believes the decision to unwind these extra cuts is problematic.
Eight OPEC+ countries have indicated a gradual phase-out of the 2.2 mb/d of extra voluntary cuts over the period from the fourth quarter of 2024 to the third quarter of 2025.
Goldman Sachs notes: "While this monthly increase can be paused or reversed subject to market conditions, the communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns outs ofter than bullish OPEC expectations," says the bank.
The decision reflects a desire among several members to resume higher production levels due to high spare capacity. This surplus was a significant factor in Goldman Sachs' above-consensus prediction of a production increase announcement.
Given the recent upside surprises to inventories, Goldman Sachs now views the risks to its $75-90 Brent range as skewed to the downside.
The analysts conclude, "As a result of the bearish meeting, and given recent upside surprises to inventories relative to our expectations, we now see the risks to our $75-90 range for Brent as skewed to the downside."