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A week before OPEC is set to decide whether to roll over the current cuts into 2021, reports of renewed tensions within the cartel once again call into question the future of the organization, Goldman Sachs said on Tuesday.
“Beyond the outcome of just another quota decision, however, there are renewed concerns about the future of the organization,” analysts at the Wall Street bank said in a note, as carried by CNBC.
OPEC is meeting on November 30, and the full OPEC+ group meets a day later to decide whether the alliance should keep the current 7.7-million-bpd cuts through the first quarter of 2021, instead of easing those cuts by 2 million bpd from January.
A three-month extension of the cuts is largely priced into the oil market, and an OPEC+ failure to extend could trigger an oil price slide because the market relies on the coalition to keep more supply off until demand recovers, possibly with the rollout of vaccines next year.
Last week’s meeting of the Joint Ministerial Monitoring Committee (JMMC) did not publicly announce what recommendation they would give to the full OPEC and OPEC+ meetings next week, which has stirred some anxiety.
Recent reports that one of the most powerful members of OPEC, the United Arab Emirates (UAE), is reconsidering its position in the cartel, “once again call into question the future and purpose of the cartel, compounding on the brief March Saudi-Russia price war and Qatar’s departure from the group last year,” Goldman Sachs said.
“As a reliable and longstanding member of OPEC, we have always been open and transparent in all our decisions and strategies in support of OPEC,” UAE Energy Minister Suhail al-Mazrouei told Reuters last week, adding that it had “demonstrated this commitment through our compliance to the current OPEC+ agreement.”
OPEC faces a difficult time as it has taken upon itself to help to rebalance the market on the one hand, while on the other hand, it aims to secure as high oil income and market share in the medium term as possible, according to Goldman Sachs.
