Goldman Sachs says that Brent is likely to be hit by a softening of demand in China.

Goldman Sachs said on Tuesday that it expects Brent crude to drop to $68 a barrel by the end of 2025, if China's oil demand stays flat until next year.

Brent futures traded around $77 a bar by 11:46 a.m. ET (1546 GMT) Tuesday. U.S. West Texas Intermediate crude (WTI), however, was trading at around $74.16.

Goldman Sachs analysts said that "soft China oil demand" and the risk of a slowdown in China's GDP growth strengthened their view that risks for the $75-90 Brent price range in 2025 are skewed to the downside.

The data released on Thursday shows that China's economy lost steam in July, with the new home price falling at its fastest rate in nine years. Industrial output also slowed, and unemployment increased.

In response to a weakening fuel demand, Chinese refineries cut crude processing rates sharply last month.

Goldman stated that "we conclude that the road fuel switch from oil to electric vehicles and liquefied Natural Gas (LNG), explains the majority of the slowdown in China's demand growth."

Goldman predicts a steep decline in China's oil demand, with a growth rate of 0.2 million barrels a day for the first half 2024. This summer is expected to be a drop in year-over year.

The Organization of the Petroleum Exporting Countries (OPEC) cut its oil consumption growth forecasts for this year as well as 2025 last week. They cited a softening in China.

(source: Reuters)