Oil Extends Losses on Demand Woes as Goldman Cuts Outlook Again

By Bloomberg

Jun 12, 2023

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An oil drilling rig in Midland, Texas, US, on Thursday, March 2, 2023. Thousands of miles away from the turmoil on Wall Street, Midland, Texas that ranked No.1 in the US for inflation just over a year ago has since ceded that title – only to lay claim to a different one: the country’s pay-raise capital.

(Bloomberg) -- Oil extended losses amid persistent concerns around the demand outlook as Goldman Sachs Group Inc. cut its price forecast again.

Brent futures traded near $74 a barrel after capping a 1.8% decline last week, the biggest weekly drop since early May. Goldman made its third downward price revision for the global benchmark in six months, trimming its estimate to $86 for the end of the year on rising supplies and waning demand.

Oil in London is around 14% lower this year as fears of a US slowdown, China’s anemic economic recovery and robust Russian flows weigh on the outlook. Even a recent pledge by Saudi Arabia to cut more production in July failed to keep prices elevated, with traders less and less responsive. The immediate gain after the announced curbs a week ago lasted only a day.

“We are at a juncture where markets are willing to bet that demand risks could overwhelm the Saudi’s ability to boost prices,” said Vishnu Varathan, the Asia head of economics and strategy at Mizuho Bank Ltd. Weakness in China, Europe the US are all weighing on the outlook, he added.

There are some bullish signs, however. Hedge funds boosted bullish bets on Brent and West Texas Intermediate crude in the week ended June 6. The US Federal Reserve is also expected to skip an interest-rate hike after a year of increases, a move likely to buoy energy demand.