Goldman Sachs blamed soft fuel demand in China and the resale of some crude cargoes by the Dangote refinery in Nigeria for dropping Brent crude prices below $80/bbl.
Still, the bank said Tuesday it believes refined product margins will recover from depressed July levels. Its analysts said processors have already cut runs because of lower margins or unplanned maintenance and predicted that diesel futures are likely to strengthen.
In the note to clients, the analysts said supply and demand are mostly balanced and acknowledged global commercial stocks of petroleum products are falling at a "significantly slower pace" than expected.
They also said they believe OPEC Joint Market Monitoring Committee, which meets on Thursday, will make no policy changes, meaning the group will gradually unwind 2.2 million b/d in production cuts. That additional supply, however, is dependent on a tight crude market that could falter, the report added.
Goldman's view on gasoline and diesel is also dependent on a rebound in low net managed money positions. The bank said it suspects stronger refining margins and higher financial demand will show up soon.
On the bearish side, the bank said Russia has confirmed it has no plans to ban diesel exports and said its estimate of commercial petroleum stocks rose last week on builds in crude oil, leaving them some 32 million bbl higher than what was expected for July. Time spreads also fell last week and that often can point to some structural weakness, according to the report.
On the bullish side, the bank projected a 200,000 b/d increase in Chinese demand with refined product builds transitioning to slight draws. An interest-rate cut from China's central bank also may help to boost commercial demand, it said.
Positioning in all oil contracts dropped by more than 20% week to week, with weak financial demand reported in gasoline and diesel. Net managed money positioning now totals just 3% of open interest, the bank's analysts said.
Goldman continued to recommend a long position in distillate cracks, which derives from its structurally bullish view of refining.
The bank also said it bet on a widening of the December 2024 European crack versus Brent with the entry point of $23.58/bbl. That crack recently fell to $20.76/bbl.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
-- Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com
(END) Dow Jones Newswires
July 30, 2024 13:52 ET (17:52 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments