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OPEC+, a loose organization of 24 oil producers led by Saudi Arabia and Russia, agreed to cut oil output by 9.7 million barrels per day on Sunday. 

Goldman Sachs’ analyst, however, is not impressed by the historical output cut agreement, as it leaves the voluntary cuts as too little and too late to avoid breaching storage capacity,  ensuring that low oil prices force all producers to contribute to the market rebalancing.

Key quote

The OPEC+ voluntary cut would only lead to an actual 4.3 million barrels per day reduction in production from the first quarter levels. 

Inland crude prices (West Texas Intermediate) will decline further in the coming weeks as storage capacity becomes saturated and expect further weakness in WTI time spreads and crude prices in the coming weeks, as already presaged on Friday, with downside risks to our short-term $20/bbl forecast.

We expect Brent prices to outperform WTI prices in the coming weeks.