Goldman: Brent might reach $120 if Hormuz outages continue
Brent may surge beyond $120 a barrel by the fourth quarter should disruptions in the Strait of Hormuz continue, as indicated by Goldman Sachs Group Inc., though this scenario does not represent the bank’s base case. “Escalation in the West Asia and the decline in estimated Persian Gulf flows to below 45% of pre-war levels have pushed oil prices back up,” analysts including Daan Struyven said in a July 20 note. Currently, Goldman anticipates Brent to be priced at $80 a barrel in the fourth quarter, with a projection of $75 for the following year, based on the expectation of a reduction in tensions in West Asia.
Nonetheless, the risks associated with the forecasts are “tilted to the upside” due to shipping disruptions in Hormuz, as well as potentially in the Red Sea, according to the analysts. Global energy markets have experienced significant fluctuations this month, with Brent prices rising above $91 a barrel. This surge can be attributed to the resurgence of hostilities between the US and Iran, alongside threats from Tehran-aligned Houthi rebels in Yemen regarding potential blockades on shipments from Saudi Arabia.
Those flows through the Red Sea have been essential in facilitating the delivery of disrupted Persian Gulf crude cargoes to customers. While diminished global inventories in the second quarter have rendered the oil market more susceptible to supply shocks, a decline in Chinese imports, along with increased demand elasticity, may constrain anticipated gains, they noted. For investors aiming to mitigate ongoing geopolitical disturbances originating from West Asia and Russia, Goldman recommended a strategy of taking a long position on the European diesel timespread from December 2026 to March 2027.
Prior to the onset of the conflict, diesel markets experienced significant tightness, as Ukraine persistently targeted Russian refineries. Additionally, the supply landscape was further complicated by heightened risks stemming from hurricanes, extreme summer temperatures, and postponed maintenance activities at production facilities, they noted. Brent futures were last recorded at $88.54 per barrel. They reached a high of $126 a barrel in late April, coinciding with the early stages of the US-Iran conflict.
