A bit excessive? Goldman Sachs says oil traders have priced in within three months of halting global air travel
Japan, Israel and Morocco each placed international travel bans when they discovered a new, perhaps more contagious, variant of the coronavirus.
However, the oil market has been much more bearish than traveling by air. According to strategists at Goldman Sachs, the market has priced in what they say is a massive 7 million bpd drop in oil demand over the next three months with no offsetting response on output from OPEC+. .
Analysts led by Damien Courvalin say that equates to “not having a single plane fly around the world for three months”. It also equates to a more intense shutdown than in Q2 2020, shortly after the novel coronavirus that causes COVID-19 first started affecting countries outside of China.
It is not surprising that these analysts consider this response excessive. Their view is that a new variant, combined with the global release of reserves, is only $5/bbl down from a forecast of $85 over the next few months.
“In fact, there is still potential to offset the upside developments due to lack of progress in negotiations with Iran (where we had expected supply to increase starting in Q2/2012). OPEC+ freezes production hikes for a month when it meets on Thursday as well as the current increase in oil substitutions could in fact offset almost half of the total negative impact of the COVID variant new and the amount of SPR released in the facility they say.
Raw futures contract
CL.1,
rose nearly $3 a barrel on Wednesday morning but is still trading below $70, after trading as high as $84.97 earlier in the month.
Natural gas contract
NG00,
in contrast, down 4%.
https://www.marketwatch.com/story/a-bit-excessive-oil-traders-have-priced-in-a-three-month-halt-to-global-air-travel-says-goldman-sachs-11638352176?rss=1&siteid=rss A bit excessive? Goldman Sachs says oil traders have priced in within three months of halting global air travel
