“This round of remarkable accuracy” from Goldman Sachs: Maintains its prediction of ‘restoration of Middle Eastern crude oil flows before mid-May’, target oil price remains unchanged but ‘greater two-way risks’

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Goldman Sachs maintains its oil price forecast unchanged, but "two-way risks" have significantly increased, and investors need to reassess their positioning logic.

According to Chasewind Trading Desk, on April 17, Goldman Sachs' Daan Struyven team released its latest crude oil market report, maintaining its 2026 annual average Brent and WTI price forecasts at $83 and $78 per barrel respectively, despite the sharp drop triggered by the "reopening" of the Strait of Hormuz.

Wallstreetcn mentioned that in last week's report, the Daan Struyven team anticipated that Persian Gulf crude exports would return to pre-war levels in about a month. And last Friday, news of the "reopening" of the Strait of Hormuz triggered large-scale programmatic liquidation of crude oil long positions.

WTI crude futures fell over 11% in a single day, retreating to their lowest level since March 10.

(Recent two-month movement of WTI futures)

This latest report emphasizes that, from a quarterly perspective, the forecast peak will occur in Q2 2026, with Brent at an average of $90/bbl and WTI at $87/bbl, then falling back quarter by quarter, with Brent dropping to $80/bbl by Q4.

The report adheres to the core assumption that "Persian Gulf oil flows will gradually normalize by mid-May." However, the risk structure previously characterized by Goldman as "significant net upside" has now been rebalanced into "two-way risk."

In other words, oil prices could spike if flows are obstructed long term, but also face significant downside pressure if demand proves weaker than expected or peace talks progress rapidly.

This means the logic of being unilaterally long oil needs to be reconsidered, and the value of option-type hedges is rising.

Risk premiums will dissipate quickly; actual oil output cuts fall short of previous expectations

The report notes that if substantial progress is made in Middle East peace talks, the geopolitical risk premium currently embedded in oil prices will face pressure to normalize rapidly, representing a significant near-term downside risk to oil price forecasts.

The sharp drop in oil futures on April 17 confirms the real-world impact of this logic.

Secondly, on the supply side, Goldman has revised down its estimate of March crude oil output cuts in the Persian Gulf.

Goldman now estimates average daily crude oil output cuts in the Persian Gulf at 8 million barrels/day in March, down from 9.7 million barrels/day as expected in mid-March.

By country, the current estimates are: Iran cutting ~500,000 barrels/day, Iraq ~3 million barrels/day, Kuwait ~800,000 barrels/day, Qatar ~300,000 barrels/day, Saudi Arabia ~2.1 million barrels/day, and the UAE ~1.3 million barrels/day.

Goldman believes storage capacity in the Middle East is higher than previously thought, which is one key reason the actual cuts fell short of expectations.

This means that even if the Hormuz flow interruption continues, its real impact on global supply may be milder than expected, representing a potential medium-term downside risk for the oil price outlook.

Demand is more fragile than expected

Market attention is shifting from geopolitics to economic fundamentals. Preliminary data indicate that oil demand—especially the most price-sensitive portions—is dropping rapidly.

Goldman highlights that weak demand is mainly concentrated in two areas: jet fuel and petrochemical feedstocks (such as naphtha and liquefied petroleum gas).

Air travel is elastic in consumption; when oil prices are high, people fly less. Meanwhile, petrochemical companies' feedstock demand is directly driven by profit—if product prices can't cover high feedstock costs, they cut production.

Why is demand reacting so strongly this time? Goldman gives three concrete reasons.

First, the pain felt by end-consumers has been amplified.

Currently, global refining margins (the spread between refined products and crude) are at extremely high levels. This means that even if crude prices haven't broken historical peaks, gasoline and diesel prices at the pump, as well as chemical feedstock costs for factories, have risen even more.

Goldman's calculations show that when Brent oil is at about $100, if refining margins stay this high, every $10 increase in refined oil prices will reduce global oil demand by about 900,000 barrels a day after 1–2 quarters—a figure much higher than the 600,000 barrels/day when margins are average.

Second, supply tightness and price pressure have hit the most fragile segments and regions of demand.

Beyond jet fuel and petrochemical feedstocks, emerging economies in Asia and Africa—more sensitive to price—bore more of the impact.

Third, some markets are showing signs of rationing and shortages.

In countries with price controls, governments are limiting retail fuel prices using subsidies, state-owned enterprise margin compression, or restricting exports.

Once crude rises above $80/bbl, state-owned companies must compress their own margins. But this kind of control poses supply shortage and rationing risk.

Upside risk: Supply disruptions could last longer than expected

Despite obvious increased downside risk, Goldman also stresses that there remain significant upside risks for oil, mainly in two scenarios:

First, the low-flow status of the Strait of Hormuz lasts longer than expected. The current 92% flow gap means every day of deadlock accumulates supply pressure. If negotiations fail or the situation escalates, oil prices would soar.

Second, crude oil and refined product production capacity suffers permanent damage. Warfare may severely impact refinery and oilfield infrastructure in the Middle East, making capacity recovery take much longer than the market expects.

Based on Goldman's analytical framework, the core change for crude oil and related asset investors now is: The risk structure has shifted from "significant net upside" to a true two-way bet.

In this context, the risk-reward of simply being long crude oil has weakened notably. Meanwhile, volatility strategies such as being long implied volatility in oil options, and spread trading between different products such as crude vs. refined products crack spreads, may better capture current market structural features.

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