April 15 (Bloomberg) -- Goldman Sachs Group Inc. dropped a recommendation to hold a ``long'' position in the S&P GSCI Brent Total Return Index amid disappointing oil demand and refiner maintenance in Europe.
Holding the position, first suggested in August, would have resulted in a loss of almost 16 percent, the bank said in an e-mailed report today. Weakness in European demand for refined fuels and a slowdown in China, are weighing on prices even as global inventory levels remain tight, Goldman said.
“In the tug of war between tight global oil fundamentals and the negative sentiment created by weak European product markets and fears of further Chinese slowdown, the latter currently prevail,” Jeff Currie, head of commodities research in New York, wrote in the report.
The euro-region economy will shrink 0.3 percent in 2013 as it struggles to move past its debt crisis, the European Commission predicted on Feb. 22. Economic expansion unexpectedly slowed in China, the world’s largest energy consumer, according to data for the first quarter from the Beijing-based National Bureau of Statistics.
Brent slumped as much as 2.6 percent today to a nine-month low of $100.41 a barrel on the ICE Futures Europe exchange.
“European margins could suffer further as the European refinery turnaround season has peaked and more and more refineries are coming back from maintenance,” Currie said. “This could put further downward pressure on Brent prices.”
Goldman Sachs’ advice to take a long position in the Brent index on Aug. 21 was a modification of earlier recommendation to buy West Texas Intermediate crude contracts. That suggestion would have resulted in a 10.8 percent loss.
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