Analysts at Goldman Sachs have increased their prediction for Brent crude, the global oil benchmark, to $90 per barrel for the fourth quarter. This adjustment comes as the closure of the Strait of Hormuz persists, leading to a tight supply situation. The disruption has caused significant inventory drawdowns, with an estimated 14.5 million barrels per day of crude production losses from the Persian Gulf, resulting in a record decline of up to 12 million barrels per day in global stockpiles in April.
The ongoing US-Iran conflict and the slowdown in shipments through the vital Strait of Hormuz have created a supply shock that has altered the global oil balance. The market is now anticipated to face a deficit of about 9.6 million barrels per day in the current quarter, a stark contrast to the surplus seen last year. Brent crude prices have surged nearly 50% since late February due to the escalated conflict, with futures hovering above $100 per barrel, raising concerns about inflationary pressures and potential impacts on global economic growth.
Goldman Sachs has highlighted that such rapid inventory drawdowns are unsustainable. The brokerage firm has warned that either supply needs to normalize or there could be an intensification of demand destruction if disruptions persist. It foresees a slower recovery in Gulf oil exports, with normalization now expected by the end of June, reflecting prolonged geopolitical uncertainties compared to earlier projections of mid-May.
Analysts at JPMorgan have noted that oil markets are undergoing rapid rebalancing as supply disruptions widen. They estimate that global supply losses have surged to nearly 14 million barrels per day in April, leading to sharp inventory drawdowns and necessitating demand adjustments. With spare production capacity largely inaccessible due to the closure of the Strait of Hormuz, the burden of adjustment has shifted to inventories and potential demand destruction.
