OPEC Agreement Doesn't Sway Goldman's Glut-Influenced Oil Price Forecast

Goldman Sachs has maintained its year-end 2017 oil price forecast at $53 per barrel

Goldman Sachs declared its skepticism of Wednesday's deal by the Organization of the Petroleum Exporting Countries (OPEC) to cut output by maintaining its year-end 2017 oil price forecast at $53 per barrel and year-end 2016 West Texas Intermediate crude forecast at $43.

However, in the short term the bank conceded that the deal, which will tentatively see OPEC output reduced from 33.24 million barrels per day (bpd) to 32.5 million bpd, might add $7 to $10 to prices in the first half of 2016.

In stated in a note, "Strict implementation of [the] deal in 2017 would represent 480,000 to 980,000 bpd less output; longer term, we remain skeptical on the implementation of the proposed quotas, if ratified."

Goldman also expressed the view of other analysts by stating, "If this proposed cut is strictly enforced and supports prices, we would expect it to prove self-defeating medium term with a large drilling response around the world."

Although the agreement is regarded as the successful culmination of over two years of false promises and collapsed talks, market gains have already started to wane, and a growing number of analysts are following Goldman's lead in expressing their doubts about the deal's effectiveness – as well as the validity of the deal itself.

Dan Yergin, energy analyst and author, told CNBC's Squawk Box, "I think what this really is is an agreement to agree at some point two months from now, and there are big questions around the allocations: is this a freeze or a cut? What's the real deal with Iran going to be?"

John Kilduff, noted freeze skeptic and founding partner of Again Capital, said the numbers behind the deal don't work because Russia recently boosted output by as much as 400,000 barrels to 10.7 million bpd with new production begun this summer.

Kilduff also told Squawk Box, "OPEC's track record on adhering to production cuts to quotas is ridiculously poor ... if not nonexistent.

"You can't believe they're going to come through on this one either."

Asian players too are expressing their concerns: Kim Woo-kyung, spokeswoman at SK Innovation, told Reuters, "We have to wait and see whether they will take real action and how long it would last."

BK Namdeo, head of refineries at Hindustan Petroleum Corp Ltd., observed that the prospective production cut "is not a very appreciable amount," and he worries about which OPEC members will actually enact the cuts: "Any supply cut will be balanced by higher production by Iran, Libya, and Nigeria; Venezuela also cannot afford to cut production."

The skepticism may be well-founded, considering that in the days leading up to the Algeria summit, Saudi Arabia and Iran declared that no deal would be reached and Russia suggested that the talks were meaningless.