Goldman Sachs Group has increased its oil price forecast, pointing to "extreme" inventory declines triggered by a prolonged closure of the Strait of Hormuz.
Analysts at the firm, including Daan Struyven and Yulia Zhestkova Grigsby, stated in an April 27 report that they now expect Brent crude to average $90 per barrel in the fourth quarter, up from a previous estimate of $80. The bank also raised its price projections for the current quarter and the third quarter, marking the latest in a series of adjustments. They indicated:
"We estimate that the loss of 14.5 million barrels per day of crude production from the Persian Gulf is driving global crude inventories to decline at a record rate of 11 to 12 million barrels per day in April. Since such extreme inventory drawdowns are unsustainable, the market may eventually require even sharper demand destruction if the supply disruption persists longer."
The global oil market has been thrown into disarray due to the Iran war, with a dual blockade of the Strait of Hormuz reducing daily transit volumes through this critical chokepoint to nearly zero. With millions of barrels per day of supply from the region disrupted, Brent crude prices have risen nearly 50% since the conflict began in late February, threatening to curb economic growth while fueling global inflation.
The analysts added:
"We now assume that exports from the Gulf will return to normal by the end of June, rather than mid-May as previously expected, and that production recovery in the region will be more gradual. Economic risks are greater than implied by our base oil price scenario, due to net upside price risks, exceptionally high refined product prices, the risk of product shortages, and the unprecedented scale of this supply shock."
Given the disruption, the bank forecasts a supply shortfall of 9.6 million barrels per day this quarter, compared to a surplus last year.
Under the updated outlook, Brent crude is projected to average $100 per barrel this quarter and $93 in the third quarter. Futures recently traded just below $108 per barrel, on track for a sixth consecutive session of gains—which would mark the longest winning streak in over a year.
The Iran war has now entered its ninth week, with peace talks stalled, the Strait of Hormuz largely impassable, and further instability spreading across the Middle East, contributing to global market turmoil. Mona Yacoubian, Director of the Middle East Program at the Center for Strategic and International Studies, commented: "The strait remains under siege, with traffic halted. Neither side appears willing to return to full-scale conflict. We are stuck in a kind of purgatorial stalemate."
Robert Yawger, Director of Energy Futures at Mizuho Securities, noted, "Consolidation above $100 is the direction we're headed. With each passing day, the likelihood of a swift negotiated resolution grows smaller."
Traders suggest that the longer the Strait of Hormuz remains closed, the more consumption will need to adjust to accommodate a supply reduction of at least 10%. A loss of 1 billion barrels appears almost certain—more than double the emergency stockpile releases announced by governments after the conflict began—and demand destruction could spread further.
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