In spite of the ongoing—and worsening—trade spat between the United States and China, Goldman Sachs has maintained its price forecast for West Texas Intermediate at US$70 for this year, CNBC reports, citing commodities head Jeffrey Currie.
Despite a string of weekly losses for WTI clearly linked to the escalation between the United States and China, Currie believes that global economic growth will support higher average prices for the year.
"When we look at the fundamental picture, it really hasn't changed. You've seen substantial liquidation, really off of the headline risk around tariffs, but the underlying fundamental story and the case for owning commodities, as well as oil, really remains intact,” Currie said.
In support of Currie’s sentiment, China stopped short of imposing import tariffs on U.S. crude oil, which some saw as a way of keeping the oil card on the table for future use. Others, like Currie, interpreted it as the only move that makes sense under the current circumstances.
“The reason why is it can be redirected,” he told CNBC. “You're not going to impact oil because there's so many producers, so many consumers."
China is hardly the most replaceable importer of oil for any exporter, including the United States, given the amount of crude it takes in. Chances are that U.S. producers would find it challenging to quickly find new markets for the over half a million barrels daily they sold to China in June. Yet with the Iran sanctions, the challenge may not be as great as it would have been otherwise.
But it seems that for Currie, the most important factor is demand. Demand is strong, according to him, and this could even lead to a shortage given the decline in global inventories and the fact that Saudi Arabia has not ramped up supply as quickly as it was expected.
By Irina Slav for Oilprice.com
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