Goldman Sachs Research, through its co-head of global commodities research and head of oil research, Daan Struyven, projects that oil prices will likely fall after the US-Iran agreement to end hostilities and reopen the Strait of Hormuz. Despite the agreement, Struyven believes oil will not immediately return to pre-war levels due to lingering conflict effects, low inventory levels, and uncertainty regarding the full reopening of the Strait. Goldman Sachs forecasts Brent oil to average $75 per barrel next year, a decrease from approximately $80 at the time of the podcast recording.
For exports from the region to fully normalize, Struyven indicates that flows through the Strait of Hormuz would need to return to roughly 70% of normal levels, considering the redirection of some flows via pipelines during the conflict. The key factor is Iran's willingness to increase flows, and if initial successful shipments occur, other shippers are likely to follow. While a partial recovery is expected, the market has largely priced in the anticipated increase in inflows and production from the Middle East. Struyven suggests the risk to their forecast is skewed to the upside.
Struyven highlights that a full reopening of the Strait of Hormuz is not guaranteed. In an upside scenario where exports from the Gulf only gradually recover and the Strait never fully reopens, potentially limiting recovery to 10 million barrels per day over the next 18 months, Brent oil could exceed $130 per barrel by year-end. Even with a projected Brent average price of $75 in 2027, which aligns with Goldman Sachs' long-term fair value, short-term prices are expected to be somewhat higher than normal due to persistently low inventory levels. Inventories are currently in a 5% deficit, indicating depletion.
