The appeal made by the United States of America to further increase output by OPEC and its allies may not materialize into a higher production over the short term.
An investment bank in U.S, Goldman Sachs, revealed that the novel of Delta Variant of COVID-19 might hamper the recent call by the United States for boost in oil output.
Recall that last week, the U.S. had urged the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to boost output to tackle rising gasoline prices that they see as a threat to the global economic recovery.
However, Goldman Sachs said in a in a statement that “We don’t see the recent White House statement as threatening the current market deficit nor the pace of the rebalancing in 2H21.”
Brent futures LCOc1 slipped 0.4 per cent to $71 a barrel on Friday, while U.S. West Texas Intermediate crude CLc1 was trading around $68.76.
However, Goldman noted an additional hike in OPEC+ production by the year-end is required to counter recent supply disappointments globally and expects OPEC+ spare capacity to be fully normalized by spring 2022.
Last month, OPEC and its allies had agreed to boost oil supply from August to cool prices that have climbed to 2-1/2 year highs.
The U.S. bank recently lowered its oil demand forecast for China, citing rising concerns over the spread of Delta variant.
The bank further said “In the short term, the Delta threat to oil demand has already softened the global balance, with the deficit narrowing from 2.3 to 1.0 million barrels per day.”
“Looking beyond the Delta headwind, we expect the demand recovery to continue alongside rising vaccination rates.”