NEW YORK (Realist English). Goldman Sachs analysts doubt that OPEC members will be able to increase production to replace Russian crude oil as soon as possible, the American CNBC TV channel reports.
Cartel members such as Saudi Arabia, the United Arab Emirates and Kuwait can increase production by 2.1 million barrels per day within “several months”. Although earlier the leaders of Saudi Arabia and the UAE refused to answer the phone calls of US President Joseph Biden.
“While such an outcome becomes increasingly likely the more Russia is excluded from the global economy, driving core-OPEC, Iran and the West closer together to increase supply, it would nonetheless likely take weeks to reach and a month for supply to start increasing,” analysts led by Damien Courvallin and Jeffrey Currie wrote.
Experts expect that Venezuela would only be able to add about 500,000 barrels per day if sanctions were lifted, and that production in Iran wouldn’t rebound until at least summer, not reaching 1 million barrels a day until the fall.
Therefore, Goldman Sachs associates its hopes for an increase in supply only with the United States, where oil production fell by more than 3 million barrels a day between 2019 and early 2021, according to government data, and have bounced about halfway back. The reason for the drop was the sharp pullback in drilling activity by Devon and others: The number of oil rigs working dropped to 250 in mid-2020 from 1,077 in late 2018, according to industry data compiled by Baker Hughes.
According to Rob Thummel, portfolio manager at Tortoise Capital, “The new financial arrangements in the oil industry suit Wall Street after it lost money on energy for years, with the S&P 500 Energy Index, dropping 75% from 2014 to early 2020,”
“The sector went through the last decade growing production like crazy, and energy was the worst performing set of stocks in the S&P 500,” So people questioned the business model. It sparked a shift to a ‘prove-it’ model. The investor wants cash flow, wants to see debt paid, see a dividend and stock buybacks.’” said Thummel. On March 15, the average cost of a gallon of gasoline in the United States was $4,316.
