Lagos, March 27, 2023 – Last week, oil prices booked their worst week since the start of the year, dropping off a cliff on renewed fears about the global economy after the collapse of two big U.S. banks and the near-collapse of Credit Suisse.
While most price forecasts for the short term have been bullish because of pro-bullish oil fundamentals, now things are beginning to change.
Tight supply, cited by virtually all forecasters as the main reason for oil price rise predictions, is giving way to fears of an economic slowdown that would dent demand and push prices lower.
Goldman Sachs has already revised its oil price forecast for the rest of the year.
Previously expecting Brent to hit $100 in the second half, now the investment bank expects the international benchmark to only rise to $94 per barrel in the coming 12 months.
For 2024, Goldman analysts see Brent crude at $97 per barrel.
“Oil prices have plunged despite the China demand boom given banking stress, recession fears, and an exodus of investor flows,” Goldman said in a note last week as quoted by Bloomberg.
“Historically, after such scarring events, positioning and prices recover only gradually, especially long-dated prices.”
Indeed, as far as events go, this one left a serious scar.
Brent crude went from over $80 per barrel to less than $75 per barrel, and West Texas Intermediate slipped down close to $65 per barrel. And this happened while authoritative forecasters such as the IEA and OPEC recently said they expect stronger demand growth than supply growth. (GBN)
