A “large” production cut by OPEC to prop up crude prices isn’t in the group’s interest because it’s likely to bolster an expansion of U.S. shale oil, according to Goldman Sachs Group Inc.
While the slide in prices into a bear market increases the chances of a reduction, trimming output by more than 500,000 barrels a day would mean further cuts are needed starting 2016 as higher prices prompt more U.S. drilling, Goldman said in a note yesterday. Some members of the Organization of Petroleum Exporting Countries including Saudi Arabia have resisted calls to decrease supply while others seek action to support crude.
“A large cut would be difficult to implement,” given the financing needs of some OPEC members, said analysts including New York-based Jeffrey Currie, referring to Libya, Iran, Venezuela and Iraq, the group’s second-largest member.
Oil has slumped about 30 percent since its June peak amid a surge in U.S. output to the highest level in more than three decades. OPEC, which meets Nov. 27 in Vienna, exceeded its 30 million barrel a day production target for a fifth consecutive month in October, according to data compiled by Bloomberg.
Brent crude, the benchmark for more than half of the world’s oil slid as much as 46 cents to $78.85 a barrel on the London-based ICE Futures Europe exchange today.