Goldman Sachs cuts oil forecast to $100 per barrel

Crude oil storage tanks at the Juaymah Tank Farm at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia, 2018.

Simon Dawson | Bloomberg | Getty Images

Goldman Sachs lowered its oil price forecast by $10 to $100 per barrel in the fourth quarter of 2022, citing rising Covid concerns in China and the uncertainty of the Group of Seven’s plan to reduce Russian oil prices.

“The market is right to be worried about the fundamentals going forward, because of the important cases of Covid in China and the uncertainty about the implementation of the G7 price,” Goldman economists including Jeffrey Currie said in a note, adding that the closure of more of China. it would be equivalent to a deep production cut imposed by OPEC+ of 2 million barrels per day.

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

The Chinese capital, Beijing, has tightened Covid measures over the past three days as the number of cases has risen to several hundred a day.

Economists added that the possibility of further shutdowns in the world’s main oil consumer would further curb demand from it.

“China’s Covid cases are at their highest on April 22, so far, the new policy response activity is unknown… [million barrels per day] quarter (to 14.0 mb/d), we expect further contraction from here,” the note said, adding that Chinese crude demand fell short of Goldman’s expectations from October to November by 800,000 barrels per day.

Investors ‘disappointed’

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

Both futures last traded in the lower two months: Brent crude futures spent less than a dollar, or 0.9%, standing at 86.83 dollars per barrel and US West Texas Intermediate futures fell 1.09% to $79.21 per barrel.

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Another factor contributing to Goldman’s downgrade was higher-than-expected levels of production and oil exports in Russia, just two weeks before the EU’s opening in early December.

“Investors were left disappointed by higher than expected production and exports from Russia. This is despite two weeks remaining before the EU embargo on crude comes into force, and the G-7 prices, where more details will be announced next week,” the investment bank said in a note.

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