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Goldman doubts increased OPEC+ production

Investment bank Goldman Sachs has said in a note that it does not expect the OPEC+ group to accede to a US request to increase production of oil to tame the rising oil prices that have fed into higher fuel prices at the pumps and could potentially affect derived products like Mobil DTE hydraulic oil.

The US believes that higher oil prices may risk derailing the ongoing global economic recovery, but with cases of the Delta variant rising in countries around the world, Goldman believes this will have a short-term drag on oil prices in the coming months, meaning that increased production by OPEC+ may be unnecessary in the short term. The OPEC+ group may also be concerned with the bank’s prediction of a one million barrel per day drop in Chinese oil demand as it tries to contain the Delta variant.

This view was echoed by Wenyu Yao and Warren Patterson, strategists at ING, who said in a statement last week that there would be some reluctance:

“From the Saudis and the broader group to increase output further, particularly given continued uncertainty over the spread of the delta variant. We will need to see how much pressure the US is willing to put on Saudi Arabia in order to see them further opening the taps.”

Beyond the short-term effects of the Delta variant on oil markets, Goldman expects demand to continue rebounding as vaccination coverage is extended. It still expects the price of Brent crude to rise to around $80 per barrel, compared with the current $71 per barrel.

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