Modest Upside, Tentative Signs Of Improving China Demand

Oil prices have steadily recovered after early weakness at the open. Brent is back at $95/bbl, while WTI is a touch over $89/bbl. These are very small gains, but build on modest positive momentum from Friday's session.

• Yesterday's China import data showed some recovery in oil demand, around 4.2% higher compared to June levels in terms of import volumes. We are still down 4% on a year-to-date basis though.
• The demand outlook also improved at the margin as Hong Kong cut the hotel quarantine period from 7 days to 3 days for intervention travellers (effective this Friday). China also eased rules around international flights where covid cases are detected, although restrictions still remain in place.
• These benefits to demand could also be offset by a fresh lockdown in Sanya, a holiday destination, while Hainan will conduct mass testing as case numbers continue to climb.
• Spec positions continued to move lower, with net longs in Nymex now back to fresh lows from April 2020.
• Goldman Sachs cut its near term forecast for oil. The Bank lowered its Q3 forecast to $110/bbl from $140/bbl, and the Q4 forecast to $125/bbl, from $130/bbl. The 2023 outlook was unchanged at $125/bbl and the Bank maintained a constructive view over the medium term.
• The market focus will also be on a number of official reports this week. The US EIA prints its short-term outlook on Tuesday. Monthly snapshots are also out from OPEC and the International Energy Agency on Thursday.
• Note for Brent the 200 day MA comes in $98.60/bbl. Brent is down further 13.6% since the start of August, after a 4.2% drop in July.