Barclays Sees $15-$25 Barrel Downside If Manufacturing Activity Slows

• Barclays: slowdown in global manufacturing activity could lead to increased downside for crude prices.

• Barclays sees an estimated decline in Russia’s liquids output of 700,000 bpd from Q4 2023 to Q4 2024.

• Barclays also isn’t writing off a potential boost in demand from China’s reopening.

Barclays cautioned on Tuesday that we could see a $15-$25 barrel downside risk for crude oil prices compared to its current forecast of $98 per barrel, according to Reuters.

In a recent note, Barclays linked that downside risk to a possible continued slowdown in global manufacturing activity. “Given the challenging macroeconomic backdrop (we) highlight $15-25/barrel of downside to our forecast if the slump in global manufacturing activity worsens similar to the 2008-09 episode,” Barclays said, adding that it “would imply 1-2 million barrels per day downside to our demand estimates.”

The bank said it remained “constructive” on oil prices, pointing to slowing U.S. output growth, market responses from OPEC+, and sanctions taking Russian crude supply off the market. Still, “the cyclical demand trends are pointing south for oil,” Barclays said.

Barclays sees an estimated decline in Russia’s liquids output of 700,000 bpd from Q4 2023 to Q4 2024.

The forecast comes as the EIA published a new 2023 Brent crude forecast as well. The Energy Information Administration estimates that the average price for Brent crude oil will be $83.10 per barrel this year—down from $100.94 per barrel last year, the latest edition of its Short Term Energy Outlook published on Tuesday shows.

While highlighting the potential downside risk, Barclays also isn’t writing off a potential boost in demand from China’s reopening, given the complete shift way from its previous zero-Covid response. Barclays is forecasting China’s oil demand to increase by 1.1 million bpd this year.

Barclays lowered its Brent crude oil price forecast for 2022 and 2023 last October to $100 and $98 per barrel, respectively, due to an expectation of slowing growth in oil demand—this followed a previous downward revision in August to $103 per barrel for both years.