An OPEC deal to cut oil output at a meeting this month is looking increasingly unlikely, with failure warranting prices in the low-$40s, Bloomberg reported citing Goldman Sachs Group Inc.
“The lack of progress on implementing production quotas and the growing discord between OPEC producers suggests a declining probability of reaching a deal on November 30,” Goldman analysts including Damien Courvalin wrote in a note.
“The lack of an agreement so far has pushed oil prices sharply lower, with weakening oil fundamentals warranting oil prices in the low $40s a barrel in our view if OPEC is unable to deliver a convincing agreement,” the Goldman analysts wrote.
Even if the fear of slumping oil prices prompts the group to hammer out an accord, the probability of the deal successfully reducing inventories is low, the bank said.
Rising October OPEC production and a faster ramp up of new non-OPEC projects have reduced the odds that an agreement translates into a decent draw in inventories during the first half of 2017, it said, estimating average OPEC output at about 34.2 million barrels a day last month.
In September, OPEC producers agreed during the informal meeting in Algiers to cut down the oil output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd.
How much each country will produce is to be decided at the next formal meeting of OPEC in November.