Oil investors don’t need to panic: Goldman Sachs

The extension of the Opec/non-Opec production cut pact through to the end of 2018, and especially the fact that the cartel and allies included an option to review progress in June, reduces the risk of both sudden supply surges and excessive drawdowns, Goldman Sachs says, noting that investor anxiety is higher than it should be.

The lowered risk of sudden sharp movements in supply and inventory drops “leads us to reiterate our view that long-dated implied volatility remains too rich,” Goldman Sachs analysts including Damien Courvalin and Jeffrey Currie said in a report, as carried by Bloomberg.

It was Goldman Sachs that warned just two days before Opec’s crucial meeting that the outcome was uncertain, heightening oil market volatility further. In a research note, the bank said there was no consensus among the participants in the deal about its extension, and there were signs of an acceleration in the rebalancing of supply and demand, which could dampen motivation to stick to the cuts.

After months of speculation and conflicting comments from various oil officials, Opec and the Russia-led non-Opec producers part of the deal agreed on Thursday to continue restricting production through the end of 2018, as expected.