Economy Goldman lowers oil price forecast by $ 10

Goldman lowers oil price forecast by $ 10

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Only a few days after OPEC had shortened its oil demand forecast as Result of the slowdown in the Chinese economy due to the Covid-19 a few moments ago Goldman has doubled its declining oil price and lowered its oil price target by $ 10 to $ 53 by the end of the year, which is now estimated to be a loss of up to 4 million barrels a day to China. “Data-reactid =” 11 “> Just a few days after OPEC cut its oil demand forecast due to the slowdown in the Chinese economy due to Covid-19, Goldman doubled and lowered its declining oil price a few moments ago increase by $ 10 to $ 53 in the first quarter of the year, and China estimates that the loss in China is up to 4 million barrels a day.

In a note by Goldman’s Damien Courvalin, the commodity strategist says the fundamental uncertainty in the oil market is exceptionally high, adding that “the loss of Chinese and global oil demand due to the coronavirus outbreak is significant but unknown in scale and duration the timing and extent of a possible production cut at OPEC + are also extremely uncertain. “

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "As a result, in his first test attempt this hit on Chinese demand & nbsp;indicates a peak of 4 million b / d in year-on-year demand.“data-reactid =” 13 “> As a result, in his first attempt to measure this hit on Chinese demand indicates a peak of 4 million b / d in year-on-year demand.

The assumption of a gradual recovery until May, according to Courvalin, would bring global oil demand growth to 0.6 Mbit / day in 2020 compared to 1.1 Mbit / day before and the global market with a surplus of 1.0 Mbit / day to 1H20. However, if OPEC + were able to agree to a 0.5 mb / d cut in the second quarter of 20, with earlier cuts being extended until the second half of 20, this would lead to normalized inventories at the end of the year.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Goldman focuses on China and writes that the current large The oil surplus appears to have been limited in China so far, "which once again underlines the importance of storage in China and emerging markets for smoothing supply and demand shocks."

These supply and demand assumptions lead Goldman to expect a global oil market surplus in 1H20.with a global cumulative inventory build of 180 mb, four times as high as before the virus, The bank then anticipates that the oil market will turn into a deficit again in the third quarter of 20, with an over seasonal decline in global inventories of 90 MB in the second half of 20, which will put the oil market back on track by the end of 2020 the virus will return. Courvalin expects China (and to a lesser extent other emerging markets) to be able to absorb half of this inventory build. In particular & nbsp;China has a large reserve capacity for crude oil with satellite images, which is approximately 150MB.Level (with potential for more, either underground or new tanks should be built quickly). India, Russia and the core producers of OPEC also have at least another 35 MB free storage capacity, which leads to a moderate OECD inventory build-up of 0.5 MB / day in the second quarter. “Data-reactid =” 31 “> Concentration on China, Goldman writes that China’s current large oil surplus appears to have been limited so far,” which again highlights the importance of storage in China and emerging markets for smoothing supply and demand shocks “.

These assumptions about supply and demand lead Goldman to expect an excess of the global oil market in the first half of 20. With a global cumulative inventory build of 180 MB, four times its pre-virus forecast, The bank then anticipates that the oil market will turn into a deficit again in the third quarter of 20, with an over seasonal decline in global inventories of 90 MB in the second half of 20, which will put the oil market back on track by the end of 2020 the virus will return. Courvalin expects China (and to a lesser extent other emerging markets) to be able to absorb half of this inventory build. specifically, China has a large reserve capacity for crude oil with satellite images of around 150 MB Level (with potential for more, either underground or new tanks should be built quickly). India, Russia and the core producers of OPEC also have at least another 35 MB free storage capacity, which leads to a moderate OECD inventory build-up of 0.5 MB / day in the second quarter.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Related: Metal Trump wants more than gold

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In terms of price, Courvalin writes that the allocation of the remaining OECD inventory to its pricing model “is based on a gradual recovery in oil prices from current levels with Brent prices of $ 53, 57, 60 and 65 / barrel for the rest of the 1st Quarter to Q4 2020 is pointing to our previous forecast of $ 63 / barrel (with a lower WTI of $ 4.5 / barrel). “The strategist also says he will update these forecasts as soon as details of the impact on Chinese and global oil demand and a possible response from the OPEC supply. “Data reactid =” 52 “>Related: Metal Trump wants more than gold

In terms of price, Courvalin writes that the allocation of the remaining OECD inventory to its pricing model “is based on a gradual recovery in oil prices from current levels with Brent prices of $ 53, 57, 60 and 65 / barrel for the rest of the 1st Quarterly through Q4 2020 is pointing to our previous forecast of $ 63 / barrel (with a lower WTI of $ 4.5 / barrel). “The strategist also says he will update these forecasts as soon as details of the impact on Chinese and global oil demand and a possible response from the OPEC supply.

Despite forecasting its Goldman base case, the bank expects oil prices to lag behind the recovery of other risky assets in EM / China as it will take some time for the currently accumulated excess of oil stocks to reverse. It is important that the bank warns that “there is still a high risk that China’s oil storage capacity will run out if the loss in demand is greater than expected”. This means that oil prices could go down even more as the risks to oil prices “despite their already remarkable underperformance” were lower.

Finally, given the relatively long speculative net positions, Goldman believes the oil market is not sufficiently concerned about this potential price gap risk, which means that speculative surrender could potentially send Brent into the 1940s or even a lower case – blown up puke from CTAs and other leveraged accounts.

From Zerohedge.com

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Other Top Reads by Oilprice.com:“data-reactid =” 72 “>Other Top Reads by Oilprice.com:

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Read this article on OilPrice.com“data-reactid =” 77 “> Read this article on OilPrice.com

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