March 22, 2023
Goldman cuts oil with covid worse in China and uncertainty over Russia's ceiling;  Brent Crude Oil Closes Flat After Dropping More Than 5%

Goldman cuts oil with covid worse in China and uncertainty over Russia’s ceiling; Brent Crude Oil Closes Flat After Dropping More Than 5%

Last Sunday (20), the US bank Goldman Sachs cut its forecast for the price of Brent oil from 110 USD to 100 USD per barrel for the fourth quarter of 2022 (Q4 2022), highlighting the growing concerns about the demand for the commodity in China. . Lack of clarity regarding the G7 plan to reduce Russian oil prices.

Despite signs of reopening the Asian giant, analysts point out that the recent moves only mark the beginning of a multi-month process of preparation. That is, a resumption of demand at normal levels should take months to happen.

However, China recorded three deaths from Covid over the weekend, the country’s first death from the virus since May this year, which could prompt the Chinese government to enact more restrictions, hurting oil demand.

According to the report, the number of cases in China is now at levels last seen during the peak of the lockdown on April 22, when oil demand fell by 2 million barrels per day on an annual basis.

With that in mind, Goldman lowered the forecast for Chinese demand by 1.2 million bpd for the quarter (to 14.0 million bpd), anticipating more hurdles ahead (currently 14.5 million bpd). “This is equivalent to the actual production cut recently implemented by the Organization of the Petroleum Exporting Countries and its allies (OPEC +), and is the group’s first successful precautionary cut,” he added.

Furthermore, weighing on analysts’ expectations is the fact that Russian oil production and export volumes are at high levels, just two weeks before the EU embargo goes into effect in early December, along with a G7 price cap. , which still need more elaboration of the market.

In light of this, the American Bank research team expects a delayed impact of the embargo on Russian production, which raised expectations by about 300,000 barrels of oil per day in the fourth quarter of 2022.

This Monday, the Brent price for January 2023 fell by more than 5%, below the level of 83 US dollars per barrel, but then it strongly pared losses.

On the commodity’s radar lowering prices was information from the Wall Street Journal that Saudi Arabia and other OPEC+ producers will discuss increasing production by 500,000 barrels per day for the next meeting on December 4th. But the declines eased after an official Saudi news agency reported that the country was not discussing such a rise. Thus, Brent crude closed for the month of January slightly lower by 0.20%, at $87.45 per barrel.

Last week, the oil contract was already down about 9%, for the second week in a row, weighed down by concerns about weaker demand in China and further increases in US interest rates.

In addition, the market structureAnd the petroleum They were changed to reflect dwindling supply concerns. a petroleum It has come close to record levels this year, as Russia’s invasion of Ukraine added to those fears.

(with Reuters)