Let the oil stay lower longer; Chinese demand growth to slow – Goldman

By David Sheppard

LONDON (Reuters) – Oil prices will remain lower for longer after halving since June, Goldman Sachs ( GS.N ) chief commodities analyst said, arguing in the latest research note that demand growth in China and other emerging economies will slow.

Goldman’s Jeff Currie, who rose to prominence forecasting oil rising above $100 a barrel over the past decade, said rising US shale production had realigned energy markets, making China a bigger and more important consumer than the United States.

“For the first time since the 1940s, the U.S. is no longer the world’s largest (oil) importer,” Currie wrote in the Jan. 26 note, part of the bank’s “Top of Mind” research series on macroeconomic trends .

“It has ceded that dubious position to China, which, along with other emerging markets, is now forced to pay for the last barrel of oil it needs from the rest of the world. Consequently, the bullish days in EM (emerging market) are over. ) demand for oil.”

The bank, which is arguably the most influential in commodities markets, already cut its energy forecasts two weeks ago to anticipate that Brent crude (LCOc1) could fall below $40 a barrel and average slightly lower over $50 this year.

He said in this week’s note that the oil crash could be the most “surprising and far-reaching market development” since the financial crisis, adding that even if oil prices recover from recent lows, they are unlikely to return to levels from the beginning. of this decade.

Brent hit an all-time high of more than $147 a barrel in 2008. It averaged about $110 a barrel between 2011 and 2013 as supply disruptions helped mask the impact of the U.S. shale boom.

“A new equilibrium price will eventually be found, which will likely be much lower than the price of the last decade,” Currie wrote.

Brent fell from more than $115 a barrel in June to a near six-year low of $45.19 on January 16 as the Organization of the Petroleum Exporting Countries refused to cut output despite falling prices as it focuses on maintaining market share. It was trading at just over $48 a barrel on Tuesday.

On Monday, Goldman Chairman Gary Cohn, a former oil trader at the bank’s commodities arm J. Aron, told CNBC that oil prices could fall to $30 a barrel, about a third below current levels.

(Reporting by David Sheppard; Editing by Susan Thomas)