Insufficient demand! Following Morgan Stanley, Goldman Sachs lowers oil price expectations

Goldman Sachs and Morgan Stanley are bearish on the outlook for crude oil demand, both lowering their oil price expectations.

Yesterday, under the dual impact of escalating Middle East tensions and Libya's suspension of crude oil exports, concerns about supply disruptions surged, causing oil prices to spike by 3% at one point, with a 7% surge over three trading days.

However, considering factors such as slowing Asian demand, increasing non-OPEC crude oil supply, and the subsequent exit of OPEC+ production cuts, Goldman Sachs and Morgan Stanley remain bearish on oil prices.

In their latest report on Monday, Goldman Sachs lowered the Brent crude price forecast range by $5/barrel to $70-85 and reduced the expected average price for Brent futures in 2025 from $82/barrel to $77/barrel.

The report explains that with the proliferation of electric vehicles, the growth rate of oil demand in Asia is further slowing down, while U.S. oil supply has exceeded expectations due to efficiency improvements.

Goldman Sachs also predicts that OPEC will continue to increase production in the fourth quarter to strategically constrain non-OPEC supply or further widen the supply-demand gap.

It is worth noting that last Thursday, Morgan Stanley also lowered its fourth-quarter Brent oil price expectation by $5 to $80/barrel.

Morgan Stanley believes that although the oil market is still in deficit, it is expected to return to balance by the fourth quarter and shift to surplus next year.

Data from the report shows that global crude oil inventories have been decreasing at a rate of 1 million barrels per day over the past four weeks, but there has been no corresponding increase in refined product markets, indicating that refineries are continuing to cut production due to weak demand and declining refining margins.

The report states that due to the impact of slowing Asian demand, the proliferation of electric vehicles, and the increase in LNG transportation in vehicles, oil market demand is weaker than expected, with global demand growth expectations lowered from 1.2 million barrels per day to 1.1 million barrels per day. It is expected that by next year, Brent crude oil prices will find support around $70.

As of the time of writing, the upward trend in oil prices has paused, with an intraday decline of about 1%, Brent crude and WTI crude oil prices are at $79.65/barrel and $76.62/barrel, respectively.