Lagos, June 12, 2023 – Oil markets have kicked off the new week on a sour note with both Brent and WTI crude sliding over $3 per barrel after Goldman Sachs’ latest call.
Last week, Goldman Sachs’ oil ultra-bull Jeff Currie once again lowered his Brent forecast for December this time to $86 a barrel from $95 and $100 before that Currie cited increasing supply from Russia, Iran and Venezuela; growing recession fears and persistent headwinds to higher prices from higher interest rates for his growing bearishness.
At 10:14 a.m. EST, WTI was trading 3.85% at $67.47, for a $2.70 loss on the day.
Brent crude was trading down 3.29% at $72.33, for a $2.46 loss on the day.
Analysts at Citi are also quite bearish, recently saying the Saudi cuts are unlikely to sustain a gain into the high $80s or low $90s thanks to lackluster demand and stronger non-OPEC supply by year-end.
Meanwhile, the markets remain on edge ahead of a crucial Fed decision on interest rates on Wednesday.
The Fed’s rate hikes have led to a stronger dollar, making dollar-denominated commodities more expensive and weighing on oil and commodity prices.
Overall, oil markets have become highly volatile in the current week as traders try to make sense of a mix of both bullish and bearish drivers.
Oil prices rallied mid-week after the latest EIA report showed crude refining has hit the highest level since August 2019 in anticipation of strong summer demand.
However, the same report revealed that U.S. crude production has hit the highest levels since April 2020 while crude exports have declined.
However, crude oil inventories at the WTI pricing hub at Cushing, Oklahoma, rose for the seventh consecutive week and are currently close to the five-year average.
The w/w crude oil balance shows unusually large swings in exports and imports. However, the most bearish piece of news came outside the U.S. market with reports that Iran might soon officially resume oil exports with nuclear talks with the U.S. progressing at a faster-than-expected clip.
“Oil prices are caught in a clash between two opposing forces, bearish asset allocators who point to monetary contraction and bullish oil speculators expecting lower inventories in 2H23. The bearish allocators will maintain the upper hand for now, as oil prices struggle to rally until the Fed eases money supply,” Bank of America Global Research’s Francisco Blanch said in a note.
By Alex Kimani for Oilprice.com
