Analyst roundup: What leading banks see coming from OPEC’s move

By Bloomberg News on 3/5/2021
Libyan crude storage facility
Libyan crude storage facility

(Bloomberg) --The surprise move by OPEC+ to maintain oil supply restrictions through April, coupled with Saudi Arabia’s decision to extend voluntary curbs, has stunned the global energy market. Prices surged again on Friday, with West Texas Intermediate topping $65 a barrel, and Brent climbing above $68.

Here’s what leading analysts make of the bold move.

Goldman: Brent Forecast Rises to $80 for Third Quarter

Goldman Sachs Group Inc. raised its second-quarter and third-quarter forecasts for Brent by $5 each to $75 and $80 a barrel, respectively. “Although members discussed Covid demand risks, our takeaway from the press conference is that the discipline of shale producers is likely behind this slower increase in production,” the bank said in a note. The outlook for OPEC+ production over the next six months was trimmed by 900,000 barrels a day.

JPMorgan: ‘Most Bullish Outcome We Could Have Expected’

JPMorgan Chase & Co. expects the OPEC+ decision to open a 1.8 million barrel-a-day deficit over the next three months on restrained supply and rising demand and it raised its Brent forecasts by $2 to $3 a barrel. The move was the “most bullish outcome we could have expected,” analysts including Natasha Kaneva wrote in a note. Saudi Arabia’s calculated bet is that U.S. tight oil will not add output beyond what the bank already expected, it said.

Citigroup: OPEC+ ‘Throws Reality to the Wind’

Oil’s rise will likely increase the strains within OPEC+ as some members will want to pump more to relieve under-pressure economies, Citigroup Inc. said in a report. Top importers including Asian giants China and India would also not be happy, and the alliance is likely to change course at its next meeting, it said. Prices could top $70 before the end of this month, the bank forecast.

RBC: The Saudis Just Delivered Another Surprise

Saudi Energy Minister Prince Abdulaziz bin Salman “once again delivered an upside surprise ending,” RBC Capital Markets analysts including Helima Croft said in a note. The prince continues to urge caution in the face of uncertainties about the recovery, insisting that it is better to err on the side of prudence than opt for an ill-timed production increase, they said. “Shots in the arm, not supercycle scenarios, seem to be front of mind for the Saudi minister.”

UBS: Inventories Expected to Extend Declines in April

Inventories are likely to fall at a fast pace in April following the cautious approach by OPEC+ and limited production growth from outside the group, UBS Group AG analyst Giovanni Staunovo said in a note. With demand expected to recover further during the second quarter on the faster rollout of Covid-19 vaccines, the bank boosted its second-half forecast for Brent to $75 a barrel, and its estimate for WTI to $72 a barrel.

ANZ: Over-Tightening Is Not a Concern, for Now

The OPEC+ decision signals an intent to draw down inventories further, without concern about over-tightening the market, Australia & New Zealand Banking Group Ltd. said in a note. The recovery in demand is seen accelerating, with growth expected to expand by 7 million barrels a day in the second half from the first, the bank said, boosting its three-month forecast for Brent to $70.

Bloomberg Intelligence: Look for Easing at April Meet

The surprise OPEC+ agreement means that Brent crude’s breakout momentum may now be extended in the near term, according to BI’s Will Hares. The group’s decision contrasts sharply with a pre-meeting consensus for an easing of quotas, he said. As significant supply sits on the sidelines, OPEC+ members will undoubtedly be eager to increase volumes at the next meeting.

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