Weak Oil Demand Threatens Goldman Sachs' Q4 Price Forecasts

Goldman Sachs has warned that weak oil demand in China and Europe poses a significant risk to its fourth-quarter Brent crude price forecast of $90 a barrel. The brokerage pointed out that April retail sales data from these regions indicate around 2 million barrels per day of downside risk to Goldman's already conservative oil demand estimates.

This could potentially reduce the Brent price forecast by about $10 per barrel, according to Goldman Sachs. The firm noted that weak demand for petrochemical feedstock across Asia is reflected in lower utilization rates at ethylene plants and softer chemical-sector industrial production in China and Japan.

Furthermore, Goldman Sachs flagged a year-on-year decline of 150,000 barrels per day in India's naphtha and LPG demand during April. However, the brokerage mentioned that indicators for road fuel consumption remain weak in China and several European countries, although demand appears resilient in the U.S. and India.

The market has become more optimistic about a potential long-lasting U.S.-Iran ceasefire, leading to reduced investor positioning and continued physical destocking ahead of the anticipated reopening of the Strait of Hormuz.