Oil prices may collapse due to China’s weak economy
2022.11.21 07:31
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Oil prices may collapse due to China’s weak economy
Budrigannews.com – Analysts lowered the forecast for oil to reflect the significant cases of the coronavirus outbreak in China, and the absence of the likelihood of a price cap on G7.
For the fourth quarter, they lowered the forecast for Brent oil to $100 per barrel, and the previous forecast was $110. Analysts believe that new quarantines in China may lead to new cases of coronavirus.
Although the confidence of China’s resumption of work in 2Q23 remains high, and the thesis on the structural bullish investment deficit remains extremely unclear, the path between this spring and next spring remains very uncertain.
The number of coronavirus cases in China has exceeded the maximum since April 22, but the new function of the reaction to the policy is not yet known. However, the logic of the virus exposure suggests that further quarantine is likely to be required if full discovery is not possible,” analysts said in a message to clients.
The new oil forecast is based on a decrease in expectations for oil demand in China for the fourth quarter of this year by 1.2%. This is the same as the effective reduction that OPEC recently introduced.
In addition, experts also noted that in the coming month, Russia will deplete the reserves imposed by the beginning of the restrictions of the European Union.
We expect a delayed impact on the production of the embargo, which will increase our expectations by about 0.3 million barrels/day for 4Q22, the net effect is a weakening of the balances for 4Q22 by 1.5 million barrels/day.
This is higher than the forecast of the current market for a decline in production of about 2 million barrels per day, which, they believe, aggravated the decline in oil prices.
In general, analysts assume that the oil market will still focus on fundamental indicators, such as Russian export flows and Chinese pandemics.
For long-term investors, this sale allows you to increase the duration of the next “lying blow” that will occur. On the tactical side, there are enough uncertainties, although discretionary positioning will continue for a long time, and CTA flows will be sold, which will reduce risks in the future, analysts say.”
