The prospects of China’s oil demand and expected further economic stimulus in the world’s top crude importer have played the biggest role in the oil price rally in July, according to Goldman Sachs.
The negative sentiment about China’s post-Covid recovery and oil demand from earlier this year has turned into a positive view on the oil market for the rest of the year, Jeffrey Currie, Goldman Sachs’s global head of commodities research, told CNBC on Monday.
Moreover, oil demand outside China is holding up “far better” than most have feared, while the very aggressive OPEC+ cuts are leading to a deficit on the market, Currie said.
Inventories in July are looking like they have declined by around 2.2 million barrels per day (bpd), he told CNBC, adding “that’s big and that just reinforces the potential for more upside.”
This weekend, Goldman Sachs’s analysts upgraded their demand outlook for this year and reiterated their 12-month Brent price target at $93 per barrel.
The world’s oil demand has hit a record-high of 102.8 million bpd this month, Goldman’s analysts wrote in a note on Sunday. The bank expects the robust demand to lead to a wider-than-expected deficit of as much as 1.8 million bpd in the second half of 2023, and to 600,000 bpd deficit in 2024. As a result of those deficits, Brent prices could rise to $93 a barrel in the second quarter of 2024, according to Goldman Sachs.
Last week, Daan Struyven, head of oil research at Goldman Sachs, told CNBC that the bank expects prices to go higher as record-high oil demand and lowered supply are set to lead to a large market deficit.
“We expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high,” Struyven said.
By Tom Kool for Oilprice.com
- Gasoline: The Price Rally That Nobody Saw Coming
- Oil Prices Rise As Focus Returns To Supply Tightness
- U.S. Drilling Dips Slightly Amid Rising Oil Prices