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Crude oil futures extended their decline Thursday to their lowest prices since August, a day after data showing a spike in U.S. gasoline inventories sparked the biggest one-day selloff of this year.
Front-month Nymex crude (CL1:COM) for November delivery finished -2.3% to $82.31/bbl, its fifth loss in six sessions and the lowest settlement value since August 30, and front-month December Brent (CO1:COM) closed -2% to $84.07/bbl, its lowest since August 24.
Both benchmarks have shed more than 7.5% during the past two trading days, marking their largest two-day dollar and percentage declines since early May.
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Crude prices have plunged more than $10/bbl from 13-month highs seen just last week, which Piper Sandler’s Jan Stuart called “risk rotation from positive-fundamental risk to negative-macro risk.”
“Bearish catalysts include signs of rising recession risk (e.g. softer labor and consumer resilience) and mistaken conjecture on the Saudis easing their supply squeeze as part of a huge, historic deal to normalize its relations with Israel,” Stuart wrote.
But Goldman Sachs is sticking to its view that strong demand and elevated pricing power will allow OPEC to keep Brent in an $80-$100/bbl range and push it to $100 by next spring.
Wednesday’s U.S. report showed a large 7% weekly drop in domestic gasoline demand and a sharp 6.5% rise in gasoline inventories, which together sparked a selloff in gasoline margins that spilled over into lower crude prices.
But Goldman believes the gasoline selloff was overdone and that the report sharply understates underlying demand, as well as underlying tightness in the global gasoline market.
Alternative measures of demand implied by ethanol blending and by physical prices suggest demand remains robust, the analysts said.
The Goldman team also believes “the soft landing remains on track as the impulse from financial conditions in 2024 U.S. growth is only modestly negative, and as global core inflation is falling rapidly.”
