Persian Gulf flows continue to be sluggish, China's crude oil imports are about to bottom out, and Brent is expected to exceed $110 in the fourth quarter (Goldman Sachs)
Goldman Sachs’ latest analysis of the oil market pointed out that oil flow in the Persian Gulf briefly recovered after the ceasefire, but fell below 50% again due to the attack on oil tankers.
Goldman Sachs’ latest analysis of the oil market pointed out that oil flow in the Persian Gulf briefly recovered after the ceasefire, but fell below 50% again due to the attack on oil tankers. China's crude oil imports have fallen sharply year-on-year due to high inventories. But the core turning point is: China’s destocking pace matches its long-term replenishment goal, and imports will most likely bottom out and rebound. If Persian Gulf flows continue to be sluggish, Brent crude oil may exceed US$110 per barrel in the fourth quarter. Geopolitical risks are the only core support for current oil prices. Currently, the market has priced in some geopolitical risks, but it has underpriced the most pessimistic scenario of "long-term failure of Persian Gulf flows to recover + rebound in Chinese demand". The upside probability is clearly higher than the downside. One-sentence conclusion: The current oil market is in a tug-of-war of "geo-supply risks vs. China's demand recovery expectations". Short-term geo-risks are dominant, but the rebound in China's imports will be the real driver of the next round of oil price rises. Positive/negative: Positive for the crude oil and energy sectors (especially companies with upstream assets). It is bad for oil cost-sensitive industries such as aviation and chemicals. Price in situation: Geographical risks are priced to a certain extent, but the rebound in Chinese imports and the $110 breakthrough scenario have not yet been fully priced in. Catalysts: 1) Weekly data on oil tanker traffic in the Persian Gulf; 2) Whether China’s monthly crude oil import data turns positive; 3) Whether Brent crude oil exceeds US$110/barrel.