Oil prices were back in rally mode on Friday, gaining modestly on hopes that Chinese stimulus can blunt the economic impact of coronavirus.
Unfortunately, economic realities in China will likely result in a sharp decline in energy consumption. That could shave another 7% off crude prices in the short term, according to Goldman Sachs.
Energy futures were higher across the board Friday, extending their winning streak to four days.
The West Texas Intermediate (WTI) benchmark for U.S. crude prices rose 1.8% to $52.34 a barrel on the New York Mercantile Exchange. It was last seen holding around $52.00 a barrel.
Brent crude, the international futures benchmark, rallied by as much as 2.1% to $56.78 a barrel. The contract would later consolidate below $57.00 a barrel.
Energy prices entered a bear marker earlier this month as the rapidly spreading coronavirus forced China’s economy into lock down. The Organization of Petroleum Exporting Countries (OPEC) and its allies are struggling to reach consensus on how to re-balance supplies.
In the meantime, OPEC has slashed its demand forecast for the year by roughly 19%. In a report released earlier this week, the Saudi-led cartel said demand is expected to grow by 990,000 barrels per day in 2020.
The impact of the coronavirus outbreak on China’s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth… Clearly, the ongoing developments in China require continuous monitoring and assessment.
China’s coronavirus scare could shave another 7% off Brent crude prices, according to Goldman Sachs. As ZeroHedge reports, Goldman has lowered its first-quarter price target on Brent by $10 to $53. That’s a decline of around 7% from current levels.
The U.S. Energy Information Administration (EIA) has also lowered its outlook, pegging the WTI crude price at $55.71 a barrel, down 6% from its prior estimate.
Nearly 1,400 people have died as a result of coronavirus and the number of confirmed cases has increased to nearly 65,000. China is expected to lose as much as one percentage point in GDP growth as a result of the disease.
Last modified: June 24, 2020 1:04 AM UTC