FAST FIVE: Goldman Cuts Brent Forecast By $10 To $53, Sees Chinese Oil Demand Plunging By 4 Million Bpd
Assuming a gradual recovery by May would bring 2020 global oil demand growth to 0.6 mb/d yoy vs.
1.1 mb/d previously and the global market in a 1.0 mb/d surplus through 1H20, according to Courvalin.
India, Russia and core-OPEC producers have at least a further 35 mb of spare storage capacity as well, leaving for a moderate OECD inventory build of 0.5 mb/d in 2Q.
Yet even his Goldman's base-case forecast play out, the bank still expects oil prices to lag the rebound in other EM/China exposed risky assets as it will take time to reverse the oil inventory surplus currently accumulated.
Importantly, the bank warns that “there remain high risks that Chinese oil storage capacity could run out should the demand loss be larger than we expect.” This means that oil prices could overshoot even more to the downside, as risks to oil prices as skewed lower “despite its already notable underperformance.” Finally, given still relatively long net speculative positions, Goldman believes the oil market is not sufficiently concerned about this potential gap risk lower in prices, which means that a speculative capitulation could potentially send Brent into the $40s or even lower in case of a full-blown puke by CTAs and other levered accounts.