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Gunvor: Weakening Demand Could Send Oil Prices Back Down To $71

Brent Crude prices could retest the $71-72 per barrel threshold over the next six months amid weakening demand in Europe and the United States and a lot of uncertainty over China’s consumption, commodity trading giant Gunvor Group says.

The oil market is at risk of a “significant correction” in the last quarter of this year or the first quarter of 2024, Frederic Lasserre, Global Head of Research & Analysis at Gunvor Group, told Bloomberg in an interview at the Asia Pacific Petroleum Conference (APPEC) by S&P Global Commodity Insights in Singapore.

“It’s very possible even without much change in fundamentals or balances,” Lasserre added.

Some countries in Europe are already in recession, the U.S. could be headed to a mild recession, too, while China could also show weakness ahead, according to Gunvor’s executive.

With global demand outlook looking more bearish, OPEC+ should extend the production and export cuts through the end of this year, Lasserre said.

Gunvor Group appears more bearish on the oil market than rival Trafigura, for example, whose Co-Head of Oil Trading, Ben Luckock, said on Monday that the $72 to $88 per barrel range is the fair price for oil. But Luckock added that the current supply tightness “leaves us vulnerable” to further rises in crude oil prices.

“The markets are probably a bit too relaxed,” Luckock said at the APPEC, as carried by Reuters.

There could be “a little bit more to come” in terms of Fed rate hikes, but the U.S. economy has been “doing incredibly well” through the interest rate hikes so far, Trafigura’s Luckock told APPEC.

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During the same APPEC event, Russell Hardy, CEO of the world’s biggest independent oil trader, Vitol, said that the tight oil market could see some reprieve in the next two months as refineries plan maintenance, but that sour crude supply would remain tight.     

By Charles Kennedy for Oilprice.com

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  • George Doolittle on September 05 2023 said:
    New Mexico clearly has not added to one drop of production for the USA let alone Gulf of Mexico. Plus the US Federal Reserve will clearly never raise interest rates higher again ever nor will borrowing costs rise for any reason ever again especially for Government anywhere least of all of course Russia which is celebrating their peace love and dope moment with all of their neighbors.
  • jack Prong on September 05 2023 said:
    With China getting its economy back on track and the Atlanta Fed calling for a 5.9% GDP growth in the 3rd quarter, it's not likely that demand will fall. Also, in 2008, oil demand only dropped 2% during that GDP downturn. What about the SPR needing to be refilled? Also, Russia and Saudi are cutting production.
  • steve Clark on September 05 2023 said:
    This is never going to happen, oil will hold or go up in price. There is too little production and there has been little to no investment into new oil fields in the past ten years. The whole demand in India and Africa has been ignored. We will see $100 oil (mostly) for the next several years

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