Goldman Flags Major Risk to Oil Prices: Weak Demand in China and Europe

Goldman Sachs has identified weak oil demand in China and Europe as a major risk to its fourth-quarter price forecasts. The brokerage says that indicators suggest around 2 million barrels per day of downside risk to its already conservative April oil demand estimates, potentially reducing the Brent price forecast by about $10 per barrel.

The firm points out that weaker-than-expected retail sales data from China and Western Europe is a major concern, as well as lower utilization rates at ethylene plants in Asia. The decline in petrochemical feedstock demand across Asia has also been significant, with India's naphtha and LPG demand down by 150,000 barrels per day year-on-year in April.

However, Goldman Sachs notes that road fuel consumption appears resilient in the U.S. and India, which may mitigate some of the risks. The market remains optimistic about a potential long-lasting U.S.-Iran ceasefire, leading to reduced investor positioning and continued physical destocking ahead of the Strait of Hormuz reopening.