Goldman admits oil at $120: he expects supply to recover no sooner than the end of June

Goldman Sachs has raised its oil price forecasts for this year due to production cuts in the Middle East, Reuters writes. In the most negative scenario, the bank's analysts admit that in the fourth quarter it will average $120 per barrel, reports the Financial Times. Supplies through the Strait of Hormuz will only recover by the end of June, Goldman predicted. It previously expected full exports to return in mid-Ma.

Goldman Sachs analysts believe oil exports through the Strait of Hormuz will not normalize until late June, rather than mid-Ma as they had previously forecast, due to a slower recovery in Gulf production, Reuters explains.

The bank raised its forecasts and now expects Brent crude to average $90 a barrel in the last three months of this year, up from the previous estimate of $80. The new target is "almost $30 higher than before the shock in the Strait of Hormuz", the bank's analysts added. US West Texas Intermediate in this scenario will trade at about $83 per barrel - against the previous forecast of $75. Compared to current levels, the new targets imply a decline of about 17% for Brent and 14% for WTI.

But if exports do not return to normal levels by the end of July and there is a "sustained reduction" in Gulf production capacity of 2.5 million bpd, the average Brent price could reach nearly $120 in the fourth quarter, the FT quotes Goldman as saying.

"Economic risks are higher than our baseline scenario suggests because of a combination of factors: the prevalence of risks of further oil price increases, unusually high prices for petroleum products, the threat of shortages, and the unprecedented magnitude of the shock itself," Goldman said in a note quoted by Bloomberg.

- Citigroup also revised its Brent oil price forecast for the rest of the year, and quite sharply. The baseline scenario now assumes that it will cost on average $110 in the current quarter, $95 in the third quarter and $80 in the last quarter, Reuters reports. At the current price, that would imply a 1.6% increase in the second quarter, followed by declines of about 12% and 26%, respectively. As recently as April 22, the bank expected lower levels of around $95 in the second quarter and $75-80 in the second half of the year, assuming a rapid recovery in shipments through the Strait of Hormuz.

In the "bullish" scenario for oil, Citi, like Goldman, assumes that supply disruptions through the Strait of Hormuz will persist until the end of June, but assumes a jump in quotations in this case to $150 per barrel - this is about 38% above the current level.

- Morgan Stanley kept its forecast for Brent prices unchanged, expecting an average of $110 per barrel in the current quarter, $100 - in the third quarter and $90 - in the fourth quarter, Bloomberg writes. According to the bank's assessment, due to the blockage of the Strait of Hormuz oil exports from the Gulf countries collapsed by 14.2 million barrels per day. This led to a reduction in global inventories by about 4.8 million bpd, although some of the fallout was offset by weaker demand, the agency notes. Morgan Stanley bases its forecasts on the assumption that supplies through the strait will resume at the end of Ma, but recognizes that risks are skewed to the upside.

- Baker Hughes, one of the largest service providers to the oil and gas industry with a large-scale presence in the Middle East, is building into its financial guidance a scenario in which the conflict between the U.S. and Iran lasts until the end of June and the Strait may not return to full operations until the second half of the year, CNBC reported April 24. Baker Hughes CEO Lorenzo Simonelli said that as a result of the war, "geopolitical risk has become a structural reality for oil and gas markets." He said the strait closure affected about 10 percent of global oil supplies and knocked out up to 20 percent of global liquefied natural gas volumes.

Oil prices rose on April 27 amid stalled talks between the U.S. and Iran and continued uncertainty in the Strait of Hormuz, which is now blocked not only by Iranian but also by the U.S. military. Brent crude futures jumped 2.4% to trade above $107 a barrel. This is the sixth day of gains in a row, which could be the longest streak in more than a year, Bloomberg notes. North American WTI rose almost 2% to $96 per barrel. Oil prices have added about 50% since the war in the Middle East began.

This article was AI-translated and verified by a human editor