Although market watchers had warned that political rivalry between the two Middle Eastern powerhouses would scupper any chance of a compromise and deal, stock and oil markets took the failure badly with Asian and European markets trading lower on Monday morning. Oil prices fell over 5 percent in early Asian trade and were still trading around $41.21 a barrel for benchmark Brent crude and $38.47 for U.S. WTI (West Texas Intermediate) in early European trade.
The slump in oil prices is continuing to pressure shale oil producers in the U.S. where production, exploration and rig counts have fallen back dramatically over the last 18 months. While price pressures continue to punish non-OPEC producers like the U.S., that drop in supply was helping markets as a whole.
Goldman's Della Vigna said this continuing pressure on producers to cut supply was ultimately good for markets. "I think no deal is probably better for the longer-term because it continues this process of rebalancing and there is no rebalancing without pressure and pressure comes through lower oil prices, through tighter credit and we're seeing all of that playing out nicely," he said.
Goldman said on Monday that it was maintaining its fourth-quarter 2016 forecast of $45 a barrel for WTI crude and said that its full-year 2017 average WTi forecast was $58 a barrel, Reuters reported. In the short-term it said its forecast for $35 a barrel for WTI in the second quarter was now "more likely" following the decision not to freeze production.