Oil’s sharp rally since late June could be erased in the next six months as weakening demand takes over from supply cuts as the main market driver, according to Gunvor Group Ltd.
(Bloomberg) — Oil’s sharp rally since late June could be erased in the next six months as weakening demand takes over from supply cuts as the main market driver, according to Gunvor Group Ltd.
Parts of Europe are already in recession and the US is likely to slip into a mild one, said Frederic Lasserre, global head of research and analysis at the energy trader. There’s also uncertainty on demand in China, the biggest oil importer, he said in an interview at APPEC by S&P Global Commodity Insights in Singapore on Tuesday.
There’s a risk of a “significant correction” in the fourth quarter or first three months of next year and Brent crude could test $71 to $72 a barrel in the next six months, Lasserre said. “It’s very possible even without much change in fundamentals or balances.”
If Gunvor’s prediction proves accurate, that would take the global benchmark back to near where it was in late June, before it surged to be within reach of $90 a barrel. The rally was powered by Saudi Arabia and Russia exporting less crude, and pushed worries over ebbing demand into the background.
Read More: Oil Executives Are Surprisingly Optimistic on Chinese Demand
The OPEC+ producers should extend their supply reductions into December as the demand picture is looking more fragile, according to Lasserre.
Gunvor’s view is more pessimistic than its rival Trafigura Group. Ben Luckock, co-head of oil trading at the oil trader, said on Monday at the APPEC event that other parts of the Chinese economy aren’t faring as badly as the nation’s property sector.
Other points Lasserre made in the interview:
- Western authorities including the Group of Seven nations and the US may need to revisit the levels for Russian price cap, especially as diesel prices climb higher
- More unplanned refinery outages have been spotted in Europe this year and refiners in the region are at risk of more technical issues as these older plants postpone maintenance and run at higher-than-usual average operating rates.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.