Goldman Sachs: The plunge in oil prices is an overreaction in the market

Foreign news on December 2, Goldman Sachs crude oil strategist Damien Courvalin believes that the sharp drop in oil prices caused by the emergence of the new variant Omicron is an overreaction of the market
.
In fact, the price adjustment is almost comical, assuming that the emergence of a new virus will bring global air travel to a complete halt for three months
.

Courvalin pointed out that the lack of discretionary buying activity in the face of uncertain coronavirus variants has led to a plummeting price decline and assumed a terrible demand outlook
.

Based on our pricing model, the market is now assuming a 7 million b/d reduction in demand over the next three months, which OPEC's response cannot offset
, he said.

Courvalin added: "This could represent any of the following extreme outcomes: 1.
No aircraft flying globally in three months; 2.
Half the intensity of global lockdowns in Q2 2020; 3.
A world worse than before vaccination: Global aviation demand fell to last winter's levels, affecting EU demand twice as much as last winter's Alpha variant and twice as much as this
summer's Delta variant hit Chinese demand.

Courvalin believes that the sharp pullback in oil prices looks overdone
.
We believe that the price decline is excessive, but it is understandable against the backdrop of low liquidity and risk appetite at the end of
the year.
Given the current high level of uncertainty, we will await further news
on variant developments and restrictions before updating our supply-demand balance and oil price forecasts.