U.S. investment bank Goldman Sachs said a recent call by the United States to OPEC+ to boost oil output is unlikely to result in higher production over the short-term given the threat to demand from the coronavirus Delta variant.
U.S. President Joe Biden’s administration on Wednesday urged the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to boost output to tackle rising gasoline prices that they see as a threat to the global economic recovery.
“We don’t see the recent White House statement as threatening the current market deficit nor the pace of the rebalancing in 2H21,” Goldman Sachs said in a note dated Thursday, maintaining their year-end Brent forecast at $80 per barrel.
Brent futures slipped 0.4 percent to $71 a barrel on Friday, while U.S. West Texas Intermediate crude was trading around $68.76.
However, Goldman noted an additional hike in OPEC+ production by the year-end is required to counter recent supply disappointments globally and expects OPEC+ spare capacity to be fully normalized by spring 2022.
Last month, OPEC+ agreed to boost oil supply from August to cool prices that have climbed to 2-1/2 year highs.
The U.S. bank recently lowered its oil demand forecast for China, citing rising concerns over the spread of the Delta variant.
“In the short term, the Delta threat to oil demand has already softened the global balance, with the deficit narrowing from 2.3 to 1.0 million barrels per day,” the bank said.
“Looking beyond the Delta headwind, we expect the demand recovery to continue alongside rising vaccination rates.”