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Oil Prices Remain Elevated on Risk Premium Despite Mideast Export Recovery, Goldman Sachs Says
Summary
Crude oil prices are being supported by a significant geopolitical risk premium even as Persian Gulf exports have returned to 2025 average levels, according to an analysis by Goldman Sachs. The bank points to low global inventories and fears of supply escalation as key factors.
Oil exports from the Persian Gulf have recovered to 2025 average levels, yet crude prices remain elevated due to a significant geopolitical risk premium, according to a new analysis from Goldman Sachs. The bank's note highlights a disconnect between the physical supply flow and market sentiment driven by supply-side anxieties.
Supply Rebounds Despite Headwinds
Goldman Sachs estimates that Gulf oil exports, including so-called dark exports, reached 23.3 million barrels per day (b/d) over the past week, a level consistent with the 2025 average. In a note published Wednesday, analyst Yulia Zhestkova Grigsby observed that total exports from the region doubled during September.
The recovery was led by crude oil, which accounted for nearly 90% of the rebound and reached 19 million b/d. Saudi Arabian exports more than doubled in September to 11.6 million b/d, while the United Arab Emirates also shipped volumes above its 2025 average, the bank said.
This rebound in shipments occurred despite an attack on the Saudi East-West pipeline that caused a nearly two-week disruption and an ongoing Houthi blockade affecting the Bab al-Mandab strait. The recovery was reportedly driven by increased shipments and ship-to-ship transfers through the Strait of Hormuz.
AdRisk Premium Keeps Prices High
Despite the restored export volumes, physical benchmarks like Dated Brent have remained near $120 a barrel. Goldman Sachs attributes this to a "large risk premium" that reflects several key investor concerns:
- Supply disruption fears: The potential for regional conflict escalation that could threaten long-term oil production.
- Record-low inventories: Global stockpiles, excluding commercial stocks in OECD nations, are at historic lows.
- Urgency to restock: A strong desire among market participants to rebuild inventories quickly amid heightened geopolitical uncertainty.
Looking ahead, the investment bank projects that prices will cool off as these pressures potentially ease. It forecasts Brent crude will moderate to $85 a barrel by the end of the year and fall further to $80 a barrel in 2027.
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