Goldman Sachs Warns of Potential $120 Oil Price Surge if Strait of Hormuz Disruption Persists

According to a recent analysis by Goldman Sachs, a prolonged blockage of the Strait of Hormuz could drive oil prices above $120 per barrel. The firm highlights the critical importance of this shipping chokepoint for global oil flows.

Morgan Stanley has also released a report, indicating that Europe is confronting tightening diesel supplies amid multiple significant supply challenges. The bank notes that local refining margins have reached record highs, while inventories continue to decline.

The report states that the current situation is indeed tight. Their supply and demand models show that European diesel inventories are projected to fall to multi-year lows by the end of the year.

Morgan Stanley believes the core constraint in the current petroleum system lies not with crude oil supply but with refining capacity. Analysts stated that the real bottleneck in the system is the refining sector, not the crude itself.

They also mentioned that some African crude cargoes have yet to be sold, while parts of the market are showing a bearish contango structure. In their overall assessment, Morgan Stanley suggests these phenomena collectively point to tightness in the diesel market, particularly in Europe.

According to the bank, the diesel refining margin, or crack spread, in Northwest Europe has risen to a record high. Regarding inventory, analysts anticipate that local diesel stocks will begin a sustained decline from August, dropping to approximately 299 million barrels by November. This would represent the lowest level for that time of year since at least 2015.

Supply changes outside of Europe are exacerbating this situation. However, Morgan Stanley also cautions that expectations for supply tightness are already largely reflected in current prices. Based on this view, the bank does not recommend investors continue betting on price increases at current levels, stating the market is "fully priced—do not chase the rally."

In market performance, European diesel futures rose as much as 3.5% during Monday's session, reaching $1,219.50 per tonne, their highest level since May 20th.