Goldman Sachs lowers oil forecast to $100 a barrel

Crude oil storage tanks at the Juaymah tank farm at Saudi Aramco’s Ras Tanura Oil Refinery and Oil Terminal in Saudi Arabia in 2018.

Simon Dawson | Bloomberg | Getty Images

Goldman Sachs lowered its oil price forecast by $10 to $100 a barrel for the fourth quarter of 2022, citing growing Covid concerns in China and lack of clarity on the Group of Seven’s plan to cap oil prices Russian.

“The market is right to worry about the fundamentals ahead, due to large Covid cases in China and a lack of clarity on the implementation of the G7 price cap,” Goldman economists said. , including Jeffrey Currie, in a note, adding that more blockages in China would be equivalent to the deep production cuts imposed by OPEC+ of 2 million barrels per day.

China recorded three Covid deaths over the weekend, the country’s first fatalities from the virus since May this year.

China’s capital, Beijing, has tightened Covid measures over the past three days as the number of local cases climbed to several hundred a day.

Economists added that the possibility of further shutdowns at the world’s biggest oil importer will further reduce demand for it.

Crude oil storage tanks at the Juaymah Tank Farm at Saudi Aramco’s Ras Tanura Oil Refinery and Oil Terminal in 2018. Crude prices have fluctuated in recent months, reaching over $120 in early June amid fears rising from a global recession, then falling to around $90 a barrel after OPEC+ cut production.

Simon Dawson | Bloomberg | Getty Images

“China’s Covid cases are at the April 22 high, but the new policy reaction function is unknown…we are lowering our expectation for Chinese demand by 1.2 [million barrels per day] for the quarter (at 14.0 mb/d), anticipating further shutdowns from here,” the note said, adding that China’s current crude demand is below Goldman’s October-November expectation of 800 000 barrels per day.

Investors “disappointed”

Crude prices have fluctuated in recent months, rising above $120 in early June amid growing fears of a global recession, then falling to around $90 a barrel after OPEC+ cut production.

Both futures last hovered around two-month lows: Brent futures lost less than a dollar, or 0.9%, to settle at $86.83 a barrel and United States West Texas Intermediate futures fell 1.09% to $79.21 a barrel.

Higher-than-expected Russian oil production and export volumes also contributed to Goldman’s downgrade, just two weeks before the EU embargo took effect in early December.

“Investors were disappointed by higher than expected production and export flows from Russia. And this despite only two weeks left before the EU embargo takes effect. on crude, alongside the G-7 price cap, for which more details are expected to be announced next week,” the investment bank said in the note.

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