Oil price forecast lowered by $10 in Q1 on coronavirus-led China oil demand concerns – Goldman Sachs

Dhwani Mehta FXStreet

In the latest client note, Damien Courvalin, the commodity strategist at Goldman Sachs, cut its oil price target by $10 to $53 in Q1 through the end of the year amid weakening Chinese oil demand due to the coronavirus outbreak.

Key Quotes (via oilprice.com):

“Fundamental uncertainty in the oil market is exceptionally high.

The loss of Chinese and global oil demand from the coronavirus outbreak is significant but remains unknown in both scale and duration while the timing and scale of a potential OPEC+ production cut remains highly uncertain as well.

As a result, in his first attempt at measuring this hit on Chinese demand points to a peak of 4 million b/d YoY loss in demand currently.

Mapping the residual OECD inventory path to his pricing model points to a gradual recovery in oil prices from current levels with Brent prices of $53, $57, $60 and $65/bbl for the rest of 1Q through 4Q 2020 vs. our prior $63/bbl forecast (with WTI $4.5/bbl lower).

Will update these forecasts as details on the hit to Chinese and global oil demand and a potential OPEC supply response become available.

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."

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

Crypto’s $638 million buyback boom may not be as bullish as it looks

Decentralized Finance (DeFi) protocols reportedly spent $638 million to buy back their native tokens in August, up 17% from a year earlier. On the surface, the buyback trend suggests the cryptocurrency industry is maturing fast, adopting one of Wall Street’s oldest tools to bolster valuations and distribute revenue. The headline becomes less impressive once the number is opened up.

Why hawkish Bank of Japan expectations aren't enough to sustain the Japanese Yen rally

The Japanese Yen (JPY) experienced a sudden burst higher after falling back below the 160.00 psychological mark against the US Dollar (USD) earlier this week amid a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.