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

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."