Goldman Sachs updated its price expectations for crude oil late on Wednesday following the news of a ceasefire deal between Iran and the United States, just hours before reports started coming in suggesting Iran may have closed the Strait of Hormuz again.
According to Goldman, the ceasefire would push Brent crude to an average of $90 per barrel in the current quarter, with West Texas Intermediate to $87 per barrel, Reuters reported. WTI is currently trading at a premium to Brent crude, but the gap is closing. At the time of writing, Brent crude was at $97.33 per barrel, with WTI at $97.93 per barrel.
“Given the reduction in the risk premium at the front of the curve and already edging up oil flows through the SoH (Strait of Hormuz), we nudge down our Q2 forecast for Brent/WTI,” Goldman’s commodity analysts wrote in a note.
They also kept their price predictions for the third quarter unchanged, at $82 per barrel on average for Brent crude and at $77 per barrel on average for West Texas Intermediate. For the final quarter of the year, Goldman’s analysts are even more bearish, expecting average prices of $80 per barrel of Brent crude and $75 per barrel of WTI.
The investment bank did allow, however, for the possibility of a less-than-best-case scenario development, with production losses of 2 million barrels daily later in the year, in which case Brent could average $115 per barrel in the final quarter. That would be the scenario where the ceasefire does not hold, and hostilities resume.
Indeed, the latest reports suggest the ceasefire did not even hold for 24 hours, with news of Iran attacking Saudi Arabia’s East-West pipeline with drones, the IRGC mining the Strait of Hormuz, and Israel continuing its bombing on Lebanon, which Iran has reportedly said represents a violation of the ceasefire deal.
By Irina Slav for Oilprice.com
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