Goldman Sachs flags demand weakness as key risk to oil price outlook

Goldman Sachs said late Sunday that weak oil demand in China and Europe poses a major downside risk to its fourth-quarter Brent crude forecast of US$90 a barrel and WTI forecast of US$83, although Middle East supply disruptions could still push prices higher.

Here are a few details:

• April retail sales data from China and Western Europe suggest roughly 2 million barrels per day of downside risk to Goldman Sachs' already conservative April oil demand estimates, potentially reducing its Brent price forecast by about US$10 per barrel.
• Weak demand for petrochemical feedstock across Asia is reflected in lower utilization rates at ethylene plants, softer chemical-sector industrial production in China and Japan, GS said, and flagged a year-on-year decline of 150,000 barrels per day in India's naphtha and LPG demand during April.
• The brokerage said indicators for road fuel consumption remain weak in China and several European countries, although demand appears resilient in the US and India.
• The market has become more optimistic on the prospects for a potential long-lasting US-Iran ceasefire, leading to reduced investor positioning and continued physical destocking ahead of the anticipated reopening of the Strait of Hormuz.

Reuters

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