- Oil sunk to a three-week low on Monday morning as the COVID resurgence threatens the outlook for fuel demand
- Goldman Sachs downgraded its economic growth forecast for China due to the virus flare-up
- Oil’s selloff has weakened the near-term Brent time-spread
- Goldman economist cut their quarter-on-quarter growth projections of GDP in 3Q and also lowered their full 2021 GDP forecast to 8.3% from 8.6% (Bloomberg)
- The new forecast assumes Chinese will bring the outbreak under control in about a month
- Goldman cut their estimate for annualized growth in the current quarter to 2.3% from 5.8% previously. They raised their forecast for fourth-quarter GDP growth to 8.5% quarter-on-quarter from the previous 5.8%
- A 4Q rebound is expected to realize after the virus curbs are lifted as well as supportive monetary and fiscal policy
- Demand concerns have weakened Brent crude’s market structure
- The amount of backwardation in Brent’s prompt spread has narrowed to $0.33/Bbl
- That’s the smallest spread since May and compares with 92c at the end of July, according to Bloomberg