(Bloomberg) -- Oil hovered around 15-month lows as a favored spread for hedge funds to trade plunged with banking turmoil shaking confidence across markets.
Brent’s December-December spread narrowed on Monday to its weakest level since Dec. 2021, suggesting a longer-term impact from recent fears of a diminished demand outlook. Even crude’s most ardent bull, Goldman Sachs Group Inc., no longer forecasts the commodity to reach $100 a barrel this year.
The bank lowered its Brent projection for the 12 months ahead as rising near-term recession concerns and an exodus of investor flows sharply lowered crude prices.
“Investor psyche has been damaged over the past week and it is going to take the emergence of a market stability to draw investors back to the fold,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “Expect more volatility and low- conviction trading as we head into the Fed this week”
READ: Oil Bulls Temper Calls for Rally as Banking Jolts World
After being stuck in a narrow channel since the end of last year, oil prices broke lower last week as the banking crisis magnified global recession fears and the resilience in Russian crude flows. The price slump has raised the prospect of intervention from OPEC+, though there’s speculation the group will stay on the sidelines for now.
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--With assistance from Julia Fanzeres.
©2023 Bloomberg L.P.
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