(April 27): Goldman Sachs Group Inc lifted oil-price forecasts as the prolonged closure of the Strait of Hormuz spurs “extreme” inventory draws.
Brent is set to average US$90 a barrel in the fourth quarter, up from a previous outlook for US$80, analysts including Daan Struyven and Yulia Zhestkova Grigsby said in an April 27 note. The figure for that period is now “nearly US$30 higher than before the Hormuz shock,” they said, adding to recent revisions.
“We estimate that 14.5 million barrels a day of Persian Gulf crude production losses are driving global oil inventories to draw at a record 11 to 12 million barrel-a-day pace in April,” they said. Given that such “extreme inventory draws are not sustainable, even sharper demand losses could be required if the supply shock persists longer,” they added.
The global oil market has been upended by the Iran war, with a double blockade of the Strait of Hormuz cutting transits through the key chokepoint to near zero. With millions of barrels of daily crude supply shut-in across the region, Brent has rallied almost 50% since the start of the conflict in late February, threatening to stoke global inflation while stunting growth.
“We now assume a normalisation in Gulf exports by end-June, versus mid-May prior, and a slower Gulf production recovery,” the analysts said. “The economic risks are larger than our crude base-case alone suggests because of the net upside risks to oil prices, unusually high refined-product prices, products shortages risks, and the unprecedented scale of the shock.”
Given the disruption, Goldman said there would be a deficit of 9.6 million barrels a day this quarter, compared with a surplus last year.
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Wall Street peer Morgan Stanley said oil exports from the Persian Gulf had slumped by 14.2 million barrels a day because of the Hormuz closure, according to a note from analysts including Martijn Rats. As a result, global stockpiles were estimated to have dropped by 4.8 million barrels a day, with weaker demand making up part of the difference, the bank said.
“Since the closure of the Strait of Hormuz, the oil market has mostly existed in two states at once: closed to most traffic, but not entirely; expected to be opened at any moment, but little change so far,” they said. “The shock is large, the data is incomplete, and the recovery is conditional,” they added.
Morgan Stanley left its Brent forecasts unchanged, expecting futures to average US$110 a barrel in the current quarter, US$100 in the third, and US$90 in the fourth.
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For Goldman, Brent was seen at US$100 a barrel this quarter and US$93 in the third under its new outlooks. Futures were last near US$108, on course for a sixth daily gain, potentially the longest winning run in more than a year.
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