Deal to keep oil output at record won't help prices, says Goldman

The first coordinated decision on oil output between OPEC and producers outside the group in fifteen years isn't going to revive crude prices, according to Goldman Sachs Group Inc.

The agreement between Saudi Arabia and Russia to freeze production will have "little impact on the oil market as proposed, while there remains high uncertainty that it even materializes," analysts including Jeffrey Currie said in a note e-mailed Wednesday.

The bank reiterated its call for prices to remain volatile while being bound to a range in the coming months until inventories stop increasing. Oil is trading near a 12-year low as record stockpiles continue to swell more than a year after the Organization of Petroleum Exporting Countries decided to keep pumping to defend market share amid a global glut. Coupled with record Russian output and US shale fields producing more oil and gas than previously estimated, prices could slide below $20 a barrel before the rout is over, Currie said last week.

"While an agreement could create the perception that more could be achieved, such as production cuts, we believe this would not be sufficient to set a floor on prices as they will only stabilize once inventories stop building," according to Goldman, which predicts that stockpiles may stop increasing in the second half of this year.

Additionally, a broader reduction in output would be self-defeating as shale producers could boost output in 80 days when prices start to recover, Currie said on Bloomberg Television Tuesday.

Brent for April settlement rose as much as 65 cents to $32.83 a barrel on the London-based ICE Futures Europe exchange and traded at $32.53 at 12:19 p.m. Singapore time. West Texas Intermediate for March delivery was at $29.18 a barrel on the New York Mercantile Exchange.