China's Crude Imports May Limit Oil Price Upside: Goldman Sachs

Goldman Sachs has released a research report indicating that China's Q4 crude imports could fall by 3 million barrels year-on-year, potentially limiting oil price upside. The bank estimates that Chinese fourth-quarter crude imports will rise modestly by about 600,000 barrels per day from the third quarter.

This is in contrast to market expectations of a sharp rebound in Chinese crude purchases, which would trigger significantly higher oil prices. However, Goldman analysts believe such a scenario is unlikely and that further attacks on Middle East crude production and export infrastructure represent the primary upside risk to their oil price forecasts.

The Strait of Hormuz disruptions have driven Brent crude prices up roughly 36% cumulatively since the US-Iran War in late February. However, China's import slowdown has tempered larger gains. Goldman believes that China's recent reduction in purchases of Russian and Iranian crude may have already provided support to global benchmark oil prices.

Goldman also estimates that a 1 million barrel-per-day swing in China's net crude imports would shift the estimated fair value of Brent crude by approximately $4 over six months. If Chinese crude purchasing volumes remain broadly unchanged and the Middle East conflict does not escalate further, Brent crude prices could pull back modestly.