The demand destruction brought on by the coronavirus outbreak across the globe is simply too large and is unlikely to be fully compensated by any OPEC+ output cut deal. Hence, analysts at Goldman Sachs are of the opinion that oil price rallies on potential output cut agreement, if any, would be transient.
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Larger headline cut of close to 15 million barrels per day (bpd) would be much harder to achieve.
A headline cut of 10 million pbd would not be sufficient and would require at least 4 million bpd of price-induced cuts to rebalance the market.
Oil price rally, if any, would be short-lived and will likely end up paving the way for a deeper drop, boosting downside risks to our near-term West Texas Intermediate (WTI) target of $20 per barrel.
OPEC+, a loose organization of 24 oil-producing nations led by Saudi Arabia and Russia, is widely expected to agree to some kind of output cuts on Thursday a bid to put a floor under prices.
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