(Bloomberg) — China’s oil imports are likely to remain subdued in the coming months if crude prices stay elevated, according to Goldman Sachs Group Inc., which could keep a lid on further gains.
Imports will rise “only moderately” by about 600,000 barrels a day in the fourth quarter from the previous three months, the bank said in a note by analysts including Yulia Zhestkova Grigsby and Daan Struyven. The market views a sharp recovery in Chinese purchases as a likely trigger for “materially higher oil prices,” but this is unlikely, it said.
“As a result we continue to view a possible escalation of strikes on Mideast crude production and export infrastructure – not higher China imports – as the main upside risk to our crude price forecast,” they said.
Brent oil is up around 36% since the start of the US-Iran war in late February due to disruptions in the Strait of Hormuz, but a slowdown in Chinese imports has helped prevent steeper gains. However, Goldman said that China’s recent move away from Russian and Iranian oil toward non-sanctioned supply had likely supported global benchmarks.
While China’s fourth-quarter imports will be higher than the previous three months, they’re still likely to be 3 million barrels a day lower year-on-year, the bank forecast. Goldman estimated a 1 million-barrel-a-day change in Chinese net crude imports sustained over six months would move Brent’s estimated fair value by about $4 a barrel.
Brent could edge lower if China’s crude buying stays broadly unchanged and if the Middle East war doesn’t escalate, as the market has likely priced in a “meaningful” rebound in Chinese imports, Goldman said.
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