Goldman Sachs, a multinational investment bank, says the new crude oil supply cut is not enough to offset the demand loss caused by the COVID-19 pandemic.
The Organisation of Petroleum Exporting Countries (OPEC) and its allies, OPEC+, had agreed to reduce global supply by 9.7 million barrels in May and June 2020.
Global supply would be cut by eight million barrels per day between July and December 2020.
The cuts would mean that Nigeria’s production would be down to 1.412 million barrels per day for the two-month period.
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Timipre Sylva, Nigeria’s minister of state for petroleum resources, had said the deal is expected to result in a price rebound of $15 per barrel in the short term.
Reuters reports that the Wall Street bank, said on Sunday, that crude oil prices would continue to decline in the coming weeks.
“The voluntary cuts would result in a reduction of only 4.3 million bpd from first-quarter levels even with core-OPEC members fully complying with the cuts, and 50% compliance by all other countries that have agreed to curb production in May.
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“Ultimately, this simply reflects that no voluntary cuts could be large enough to offset the 19 million bpd average April-May demand loss due to the coronavirus.”
The bank projects that Brent crude price would rebound to $52.50 per barrel in 2021 although it said the risks ‘skewed squarely to the upside’ since the ‘violent market rebalancing’ will be followed by a sharp rebound once demand picks up again.
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