It’s not a secret that OPEC’s agreement aimed at cutting the cartel’s oil production came as a surprise to most of the representative of the international expert and investing community. Still, some experts believe that there is no point in going positive over the news since the agreement is not going to back stability and higher oil prices anyways. Goldman Sachs experts are some of those guys who don’t trust in the long-lasting effect of the mentioned OPEC agreement.
To be more specific, Goldman Sachs experts assume that even if the cartel is determined to gradually put the plan into practice and push oil prices higher, this is going to trigger higher production in other countries rich in crude oil. That said, this is going to cover the production cuts over the mid term.
The experts also released the WTI price forecast for the end of 2016. This is $43 per barrel for now. The same forecast for 2017 is $53 per barrel. On top of that, the experts seriously question the agreement because historically the cartel has never been good at following their production quotas strictly. Why should we expect radical changes now? They are likely to behave the same way, which means that in reality they may well violate the agreement, especially during the season of higher demand for crude oil.
For those of you who don’t know, OPEC’s ministers agreed to cut their production quotas to 32,5 million barrels a day total. This is really a surprise since OPEC has spent around 2 years trying to sing it. Even in advance of the unofficial summit, most participants were skeptical about the likelihood of signing the mentioned agreement.
Some experts say that the agreement allows Libya, Nigeria, and Iran to enjoy a special status allowing them to avoid cutting their production but their production hikes have to be capped. Anyway, this is just a preliminary decision, which doesn’t actually have true effect. The real agreement is to be signed in November during the next official OPEC summit.
