Oil swung between gains and losses in volatile summer trading as investors continue to weigh the potential hit to demand from an economic slowdown.
West Texas Intermediate was down 0.7% near $88 a barrel, after earlier rising above $90. Investors have backed away from commodities in recent months as slowing growth fuels concern that energy usage will drop, including for gasoline. That helped WTI to sink by almost 10% last week.
One of the market’s most bullish voices, Goldman Sachs Group Inc., cut its near-term price forecasts. The bank previously expected $140 for Brent in the third quarter, but now sees $110. It said it remains bullish, however, as stockpiles continue to decline and prices haven’t yet reached a level at which demand is being destroyed.
Oil is “down but not out,” Goldman analysts said. “We continue to expect that the oil market will remain in unsustainable deficits at current prices.”
Crude has had a roller-coaster ride in 2022, soaring in the opening months of the year following Russia’s invasion of Ukraine, then sinking from June as global slowdown concerns gathered pace. Elevated inflation has prompted central banks including the Federal Reserve to raise interest rates, with investors wagering that more hikes remain in store this half.
Oil’s initial drop on Monday came despite data released at the weekend that showed China’s imports of crude rose in July from the lowest in four years as travel and transportation activity improved after Covid-19 curbs eased. Still, the country’s year-to-date total remains about 4% lower.
The drop in crude since June has been accompanied by a sustained retreat in gasoline prices, which will be welcomed by US President Joe Biden as his administration seeks to tackle inflation. Average nationwide retail gasoline prices in the US dropped for 54 days straight to Saturday to a little above $4 a gallon, according to auto club AAA. They peaked at a record above $5 in June.
With oil prices just above a six-month low, investors are in line for a deluge of market commentary this week. The US Energy Information Administration is set to issue its short-term outlook on Tuesday, followed by monthly snapshots from producer group OPEC and the International Energy Agency on Thursday.