Goldman lowers Brent forecast

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Updated 25 April 2013
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Goldman lowers Brent forecast

NEW YORK: Goldman Sachs lowered its 2013 Brent price forecast to $ 105.00 from $ 110.00, as a possible slowdown in Chinese demand, weaker-than-expected European demand, and higher European refinery activity were seen weighing on crude oil.
Goldman also lowered its three-month Brent forecast to $ 100.00 per barrel from $ 110.00 it said in a note.
Goldman said its Chinese economists saw near-term headwinds to real growth improvement continuing, along with an increased risk that Chinese oil demand growth will remain relatively weak in the near-term.
It also shifted its near-term outlook on commodity returns to Neutral from Overweight, citing deepening concerns around global growth.
Goldman left its assumption on the WTI-Brent spread unchanged, with its 12-month outlook for WTI crude at $ 97.00 per barrel.
Brent crude rose above $ 101 a barrel yesterday as stockpiles of gasoline declined in top consumer the US, but gains were checked by the prospect of slower growth and fuel demand in major economies.
The North Sea benchmark had been trending higher in earlier trade, tracking European equities on a view that central banks could intensify efforts to revive a flagging global recovery.
And the possibility of stronger demand for US gasoline emerged after data from the Energy Information Administration (EIA) showed stocks of the motor fuel slumped last week.

“The report is supportive to prices due to the large decline in gasoline inventories,” said John Kilduff of Again Capital LLC in New York.
“Being the seasonal leader of the complex, the decline will have an outsized effect on price action.
Brent futures were up 71 cents at $ 101.02 a barrel by 1458 GMT, while US oil gained 97 cents to $ 90.15.
Oil’s gains were kept in check by gloomy economic data in big consumers.
Growth in Chinese factories slowed to a crawl as export demand dwindled, while Germany, the euro zone’s largest economy, saw business activity decline for the first time in five months.
The prospect of a slowing global economy dampening oil demand growth has already shaved $ 10 off the price of Brent since the start of April. And uncertainty over global growth may result in commodities facing increased volatility.
“We continue to view recent weakness in the data flow as consolidation, rather than the start of a 2012-style capitulation, but remain watchful of the loss of momentum in the manufacturing sector from these key countries,” analysts from ANZ bank said in a note.
In the US, crude stocks fell last week as imports dropped while refined fuel inventories were mixed, data from industry group the American Petroleum Institute (API) showed late on Tuesday.
API’s data showed that crude inventories fell by 845,000 barrels in the week to April 19, compared with analysts’ expectations for an increase of 1.5 million barrels.


Saudi Arabia’s economy in a ‘sweet spot’, says US bank

Updated 23 April 2018
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Saudi Arabia’s economy in a ‘sweet spot’, says US bank

  • Bank of America Merrill Lynch Global Research: “With a more entrenched current account surplus possible this year, FX reserves could increase.”
  • “Reforms are likely to broadly proceed, even at these levels of oil prices, although spending may increase further above baseline expectations.”

LONDON: The Saudi Arabian economy is in a “sweet spot”, with higher oil prices allowing the Kingdom to boost spending while not having a significant impact on the country’s fiscal balance, according to Bank of America Merrill Lynch Global Research.

“Our meetings on Saudi Arabia comfort us in our view that the economy is in a sweet spot. Higher oil prices are allowing the focus on boosting activity not to materially impact fiscal balances,” the note said, published following the IMF and World Bank Spring meetings held in Washington DC this month.

“With a more entrenched current account surplus possible this year, FX reserves could increase this year,” the note said.

The bank forecasts the country will continue to push forward with its reform process regardless of the rising price of oil. Many of Saudi Arabia’s reforms are part of its Vision 2030 that aims to diversify the country’s economy away from its reliance on oil.

Brent oil reached a three-and-a-half year high on 19 April, hitting $74.74 a barrel.

“Reforms are likely to broadly proceed, even at these levels of oil prices, although spending may increase further above baseline expectations,” the note said.

The bank was also upbeat about Egypt’s economic prospects, noting that the country’s “macro stablization” is continuing and that its reform program, which includes cutting fuel subsidies and reforming the tax system, remains “intact”.

“Authorities are on track to achieve a small 0.2 percent of GDP primary surplus this fiscal year. The target is to bring the primary surplus to 2 percent of GDP next fiscal year, and maintain it there going forward,” it said.