Oil prices unmoved by OPEC+ production pause. Two reasons why

Oil prices (CL=F, BZ=F) saw slight gains on Thursday after reports indicated that OPEC+ agreed to pause oil production hikes. Goldman Sachs Managing Director and Head of Oil Research Daan Struyven joins Market Domination to offer insights into the energy market's muted reaction.

Struyven attributes the modest price movement to two factors: First, previous reports had already hinted at OPEC delaying production increases, so "some of the news was already priced in as of today."

Second, the decision only delays "relatively small production increases by two months," resulting in only a moderate "reduction in expected supply."

Despite this development, Struyven maintains his range-bound view for oil prices of $77 to $85 per barrel, with a target of $74 per barrel by December 2025.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith

Video transcript

We're watching the commodity market today.

There's been plenty of volatility in oil prices, crude closing the day with modest gains after being up as much as 2%.

Joining us now Don Stri and Goldman Sachs, managing director and head of oil research John, Thank you for being here as we were talking about earlier.

There is now this OPEC plus agreement, reportedly to push off the kind of production increases that had initially been talked about here.

Um, why didn't we see a more sustainable gain in oil prices from that report?

Great.

It's great to be on.

Thank you for having me.

So I think 22 reasons.

You know why we saw only a modest increase in prices in response to the news First, I think that following earlier reports including yesterday that officials were strongly considering to delay the production increases, I think some of the news was already priced in as of today.

Um, and I think the second increase is that, um, it's it's about delaying uh, relatively small production increases by two months.

And so the the the reduction in expected, uh, supply is, uh is only is only moderate.

I'm interested uh, don, just on the demand side of the equation, we obviously talked a lot about the weakness, Uh, out of China.

We've also got some downbeat economic data out of the U SI mean, I'm interested.

What is the demand picture in the US look like?

So the summary on demand globally is weakness in China, as you alluded at, but resilience in the world outside of China, especially in the US, but also, for instance, in Europe and in India, in places like the US and Europe, we are seeing relatively firm oil demand for products such as gasoline and jet fuel related to the service sector and related to related to consumer, which is the part of the economy that is outperforming is doing better than the manufacturing sector, which tends to rely more on diesel oil, which has been coming in softer globally in the US but also in China.

So Tom put it all together for us.

What are you all expecting for oil both in, say, the three month time horizon, But then talk to us about the longer run.

Maybe the 12 month horizon also perfect.

So we continue to stick to our range bound view for oil prices.

We think that brands will remain in the 7285 range with our December 2025 target at $74 per barrel, so pretty close to current prices.

In the short term, we assume a modest pick up made modest stick up in prices because oil looks somewhat cheap relative to the level of inventories and because we also assume that the market will be in a deficit in September and October, in part because of a disruption to Libya's supply this month.