Hormuz shipping halt "prolonged", Goldman Sachs significantly raises Q4 oil price forecast

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Goldman Sachs has significantly raised its fourth-quarter crude oil price forecasts, citing expectations that the disruption of oil flows through the Strait of Hormuz will last longer than previously assumed. This adjustment means that if the situation deteriorates further, oil prices may break the historical peak set in 2008.

Goldman Sachs analysts Daan Struyven and others raised their fourth-quarter Brent crude price forecast from $66 per barrel to $71 per barrel in a report released on March 11, while the WTI crude forecast was increased from $62 to $67.

Goldman Sachs pointed out that if the low flow through the Strait of Hormuz persists until late March, oil prices will trend upwards during this period “until the market is convinced the likelihood of a long-term disruption is low.” The bank also warned that if flows remain constrained throughout March, daily oil prices could surpass the peak levels seen in 2008.

On March 12, concerns over energy supply disruptions, rising oil prices, and a rebound in inflation continued to escalate. As of publishing, WTI crude rose 8% to $93.

In extreme scenarios, oil prices could reach up to $93 per barrel

The core basis for the above forecast revisions is a re-evaluation of the duration of flow disruption in the Strait of Hormuz. Goldman Sachs raised its baseline assumption from oil flow dropping to 10% of normal and lasting 10 days, to 21 days, followed by a 30-day period of gradual recovery.

Goldman Sachs outlined price estimates under two stress scenarios in its report. If the disruption lasts 30 days, fourth-quarter Brent crude average prices are projected at $76 per barrel, and WTI at $72. If the disruption extends to 60 days, Brent’s average price will surge to $93 per barrel, and WTI to $89.

Although Goldman Sachs acknowledges two-way risks to oil prices, its report notes that the balance of risk “skews to the upside.” In the absence of clear improvement in flows, market expectations regarding the duration of the disruption will be the key variable determining short-term price trends. Goldman Sachs’ comments suggest investors should prepare for scenarios involving higher energy prices.

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