A meeting of oil producers in Doha, Qatar, this month to discuss freezing crude production will do little to boost prices, and may even cause them to fall, Goldman Sachs Group Inc. said.
The plan involving most nations in the Organization of Petroleum Exporting Countries and some non-members such as Russia won’t accelerate the reduction in the oversupply on global crude markets, according to the bank, Bloomberg reported.
If countries fail to reach a firm agreement when they meet on April 17, it could deliver a “bearish catalyst” for prices, it said.
“We do not expect the meeting to deliver a bullish surprise,” analysts Damien Courvalin and Jeff Currie in New York said in the report.
“A production freeze at recent production levels would not accelerate the rebalancing of the oil market” and cuts make little sense because they would benefit rival producers, they noted.
Brent crude futures closed at a four-month high above $40 a barrel last week, after sinking to a 12-year low in January, on speculation the deal led by Saudi Arabia and Russia could temper the global supply glut. While 16 nations with more than half the global crude output will attend the Doha meeting, some major producers, including Iran and Brazil, have said they won’t cap production.
OPEC production could actually increase, rather than staying stable or diminishing, if countries can restore disrupted output, according to Goldman Sachs.
The group could revive about 500,000 barrels a day of halted supplies, if production resumes in Iran, Libya and the Neutral Zone shared by Saudi Arabia and Kuwait, the bank estimated.
