(Bloomberg) — Goldman Sachs Group Inc. raised its oil price forecast as a prolonged closure of the Strait of Hormuz spurred “extreme” inventory depletion.
Most read from Bloomberg
Analysts including Daan Struyven and Yulia Zhestkova Grigsby said in an April 27 report that Brent crude oil prices averaged $90/barrel in the fourth quarter, higher than the previous forecast of $80/barrel. Numbers for the period are now “nearly $30 higher than before the Hormuz shock,” they said, adding the recent revision.
“We estimate that a loss of 14.5 million barrels per day of crude oil production in the Persian Gulf contributed to a record drawdown in global oil inventories in April, reaching 11 to 12 million barrels per day,” they said. Given that such “extreme inventory drawdowns are unsustainable, more severe demand losses may be required if the supply shock persists for longer,” they added.
The Iran war has roiled global oil markets, and a double blockade of the Strait of Hormuz has reduced oil shipments through the key choke point to almost zero. Brent crude prices have risen nearly 50% since the conflict erupted in late February as millions of barrels of daily crude supplies have been shut down in the region, threatening to stoke global inflation while hampering economic growth.
“We now assume that Gulf exports will normalize by the end of June compared with the previous mid-May, and that the Gulf production recovery will be slower,” the analysts said. “Economic risks are greater than our crude oil base case suggests due to net upside risks to oil prices, unusually high refined product prices, product shortage risks, and the unprecedented scale of the shock.”
Goldman Sachs said the supply disruption would result in a deficit of 9.6 million barrels per day in the current quarter, compared with a surplus last year.
A report from analysts including Martijn Rats and Wall Street peer Morgan Stanley said Persian Gulf oil exports fell by 14.2 million barrels per day due to the closure of the Strait of Hormuz. Global inventories are expected to fall by 4.8 million barrels per day as a result, partly due to weaker demand, the bank said.
“Since the closure of the Strait of Hormuz, the oil market has essentially existed in two states simultaneously: closed to most traffic, but not completely; and expected to open at any time, but little has changed so far,” they said. “The shock is large, the data is incomplete, and the recovery is conditional,” they added.
