Goldman Sachs raises oil price forecast

Goldman Sachs has raised its oil price forecast as disruptions to energy production in the Gulf continue due to the ongoing conflict in the Middle East.

Analysts at the investment bank now predict that Brent crude oil, the international benchmark, will trade at around $90 per barrel in the last three months of this year, up from an earlier projection of $80, SEEbiz reports.

Analysts estimate that Middle Eastern oil exports will only normalize by the end of June, not mid-May, and that the crisis reduced supplies by up to 12 million barrels per day in April.

Goldman now expects U.S. crude to trade at around $83 a barrel in the fourth quarter, up from a previous forecast of $75. Brent rose more than 1 percent on Monday, topping $106 a barrel.

Prices have risen more than 20 percent since April 17 as peace talks between the United States and Iran stalled and Washington implemented its own naval blockade of the Strait of Hormuz. In early March, Brent was trading at nearly $120 a barrel.

“Prices remain below their late-March peaks, likely because market expectations of the reopening of Hormuz have reduced the risk premium and led to inventory drawdowns,” the analysts wrote.

Longer-term Brent futures contracts show that the market still expects oil prices to fall, with December trading at around $84,8 per barrel.

Goldman said there would be long-term "scarring" of production capacity in the Gulf of Mexico of about 500 barrels per day, primarily due to losses in Iraq.

Global stock markets have rebounded despite the recent rise in oil prices, with the S&P 500 and Nasdaq Composite closing at record highs on Friday, thanks to strong corporate earnings.

Goldman analysts also warned that the economic consequences of higher energy prices will be greater than the oil price itself suggests, due to the risk of product shortages and an "unprecedented scale of shock."

The bank also highlighted the risk of restrictions on US oil exports, which could further widen the price difference between Brent and US oil.

The Financial Times reported last week that Asian refineries are cutting production, reducing the supply of jet fuel and other refined products, as the loss of Middle Eastern crude increases the cost of securing alternative sources of supply.