Rising crude oil prices are beginning to weaken consumer demand, a trend that could limit further gains in global oil markets despite mounting concerns over supply disruptions in the Middle East, according to analysts at Goldman Sachs.
In a recent market note, the investment bank said demand destruction caused by elevated energy prices is emerging as a significant factor influencing the outlook for crude markets.
“We see significant upside price risks from potentially more persistent Mideast supply losses but also meaningful price downside from weaker demand,” the analysts said.
They added that actual oil consumption may have declined more sharply than previously anticipated as consumers and businesses respond to higher fuel costs.
Goldman Sachs estimates that global demand destruction may have reached as much as 2 million barrels per day in May, based largely on oil sales data from China and Western Europe.
Weak Demand Creates Downside Risk for Prices
The bank noted that weaker consumption could place downward pressure on crude prices in the coming months. Analysts projected a potential downside risk of about $10 per barrel for Brent crude in the fourth quarter, even as their baseline forecast remains at $90 per barrel.
Additional pressure could come from China, the world’s largest crude importer. Energy consultancy Energy Aspects recently projected that Chinese oil imports could fall to their lowest levels since the COVID-19 lockdown period in 2020, a development that could further dampen demand.
Despite concerns about weakening consumption, oil prices remain sensitive to geopolitical developments. Brent crude recently traded at $92.87 per barrel, while West Texas Intermediate stood at $89.47 per barrel following reports of renewed military exchanges involving the United States and Iran in the Persian Gulf.
The market outlook remains uncertain as traders balance signs of softer demand against warnings from energy industry leaders, including executives from Exxon and Chevron, who have cautioned that tighter supplies could trigger noticeable shortages within weeks.
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