Oil prices continued their march higher, rising to the highest since 2013 amid shortage fears as Russia’s war on Ukraine intensifies.
But the announcement did little to calm markets.
"We do not view this as sufficient relief," Goldman Sachs wrote in a note to clients following the announcement."Demand destruction — through still higher prices — is now likely the only sufficient rebalancing mechanism, with supply elasticity no longer relevant in the face of such a potential large and immediate supply shock," the firm added.
Both WTI and Brent are now up more than 40% year to date as demand rebounds while supply remains constrained. Global producers have kept output in check, and OPEC and its oil-producing allies have been slowly returning barrels to the market after implementing an unprecedented supply cut of nearly 10 million barrels per day in April 2020.
The firm did note that there"could be a strategy shift in the coming weeks" should there be an actual physical supply disruption. Russia is a key oil and gas producer and exporter — especially to Europe. So far the country's energy complex has not been targeted by sanctions directly. However, there are ripple effects from the financial sanctions levied against Russia that have made some foreign buyers reluctant to buy energy products from Russia.
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