Goldman Sachs Sees Brent Crude Holding $80-$90 Range Amid Geopolitical Tensions

Goldman Sachs projects Brent crude will trade within a stable $80 to $90 per barrel range, contingent on the geopolitical situation in the Middle East. The investment bank stated this price band is likely to hold unless there is a confirmed diplomatic agreement between the U.S. and Iran or a significant escalation of regional conflict.

Geopolitical Risks and Market Pricing

According to a note from Goldman Sachs, recent reports of the U.S. canceling planned attacks on Iran to pursue negotiations have caused spot Brent futures to retreat to the low-to-mid $80s. Strategists led by Yulia Zhestkova Grigsby noted that the market appears to be pricing in "only a moderate risk premium despite still very high uncertainty about Middle East supply."

Based on its analysis of OECD commercial stocks and current demand, Goldman Sachs estimates the fair value for Brent spot prices is around $80 a barrel. This suggests that while geopolitical tensions are a factor, current prices are largely aligned with inventory levels and fundamental demand.

Tightening Physical Market

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Despite the relatively stable price forecast, Goldman's data indicates the physical oil market is tightening significantly. The bank's global visible stocks counter registered a drawdown of 6.3 million barrels per day (bpd) over the past two weeks.

This tightening is driven by several concurrent factors:

• Supply Disruptions: Oil flows from the Persian Gulf have fallen to just 36% of pre-war levels, while total flows through the Red Sea declined by 1.7 million bpd week-on-week.
• Lower Russian Exports: Russian crude and condensate exports dropped by 1.3 million bpd over the last two weeks, following drone attacks on oil tankers.
• Strong Asian Demand: Net imports of crude and condensate into Asia rose by 5.6 million bpd over the same period, with China alone accounting for an increase of 2.3 million bpd.

To partially mitigate these disruptions, Saudi Arabia has redirected flows through the SUMED pipeline, which connects the Gulf of Suez to the Mediterranean. Flows to the pipeline's Ain Sukhna terminal increased by 1 million bpd over the past week, according to the bank.