Goldman Sachs once again raised its outlook for oil prices, now seeing Brent crude at an average of $90 per barrel in the fourth quarter of the year, and West Texas Intermediate at $83 per barrel.
At the time of writing, Brent crude was trading at $106.68 per barrel, and WTI was changing hands at $95.35 per barrel as negotiations between Iran and the United States remain on hold, with the restart uncertain.
“The economic risks are larger than our crude base case alone suggests because of the net upside risks to oil prices, unusually high refined product prices, products shortages risks, and the unprecedented scale of the shock,” the bank’s analysts said in a note over the weekend.
This shock will start destroying demand for oil and, indeed, it already is, according to Goldman Sachs. The team expects global demand for oil to decline by 1.7 million barrels daily over the current quarter and by some 100,000 barrels daily over 2026 compared to 2025.
“Because extreme inventory draws are not sustainable, even sharper demand losses could be required if the supply shock persists longer,” the Goldman team wrote. The bank has estimated lost production in the Middle East at 14.5 million barrels daily as of this month.
Meanwhile, ING commodity analysts wrote earlier today that “The lack of progress [on peace talks] means the market is tightening every day, requiring oil prices to reprice at higher levels. There’s little alternative to fill a roughly 13m b/d shortfall.”
Given the tightening of supply, prices will inevitably go higher, dampening demand prospects, Warren Patterson and Ewa Manthey also wrote. “In the short term, inventories help to fill the gap, whether commercial or strategic reserves. Clearly, the longer this persists, the more demand destruction we will need to see. To see further demand destruction, prices will need to move higher,” they noted.”
By Irina Slav for Oilprice.com