Courtesy of Bloomberg, here is a rundown of what some prominent Wall Street analysts think of the proposed OPEC production cut. At a minimum, they feel it might be difficult to enforce, let alone keep US production offline as the price of WTI creeps higher.
If you enjoy the content at iBankCoin, please follow us on TwitterCitigroup Inc. analysts including Ed Morse:
Assigning individual country quotas is the “major dispute” and while they may be decided at OPEC’s next meeting on Nov. 30, “this is still kicking the can down the road.”
Morgan Stanley analysts including Adam Longson:Reduction in output to 32.5 million barrels a day doesn’t solve oversupply immediately, but could potentially accelerate market re-balancing to as soon as early 2017.
Focus now turns to execution of deal, where history is poor.Goldman Sachs Group Inc. analysts including Damien Courvalin and Jeffrey Currie:
The production plan is likely to boost prices short term, but output quotas could be exceeded even if they are ratified at the November meeting.
“Strictly implemented in the first half of 2017 and all else constant, the production quotas announced today should be worth $7 a barrel to $10 a barrel to the oil price.”
“It has historically taken a fall in oil demand to ensure quota compliance, as in that case, production is forced lower by a decline in refinery intake around the world. This is not the case today with resilient demand growth.”
Stephen Schork, president of Schork Group consulting company in Villanova, Pa.:
“Do the Saudis want to awaken a sleeping giant? They will if prices top $50. The rig count is already rising and shale production has stabilized. Predictions of sub 8 million barrels a day U.S. production next year will go to the wayside.”
Barclays Capital Inc. analysts including Michael Cohen:“The agreement is significant, but we believe that what OPEC is now officially saying it will do, it had been planning to do anyway.”
Saudi output was forecast to fall after its peak summer power burn needs and November-December refinery turnarounds will remove some demand.
Iraq’s rejection of secondary-sources oil output estimate is “first sign that cracks are already appearing in deciding which producer cuts and by how much.”
USA will pump like crazy and price will stay between $45 and $50 imo. Also Russia and others have no choice but to pump as much oil as possible to pay their bills. Maybe $60 in 2 years?
Once shorts are through covering oil stocks, reality will set in and market dump will begin. Being careful here with funds.