Where will oil prices go?

Oil prices have remained stable below $100 a barrel since the US initiated a naval blockade to prevent Iranian-linked vessels from passing through the Strait of Hormuz. The few quieter days in the futures market so far this week are unlikely to last long amid the volatile geopolitical situation in the world's most vital oil shipping lane.

Oil prices are likely to either surge, reaching new highs, or plummet to pre- military conflict levels, depending on the US-Iran negotiations, but above all on whether or not traffic can pass through the Strait of Hormuz and the speed at which normal shipping activity resumes.

Currently, despite the blockade and the US declaration that it is a great success, the movement of non-Iranian vessels has not yet been restored, while some Iranian-flagged ships have been recorded by ship tracking units as successfully breaching the blockade.

Globally, physical supply remains severely constrained, as evidenced by the $150/barrel price for some crude oils outside the Middle East that refineries are willing to pay. Spot crude oil prices have surged due to limited supply and are approximately $40/barrel more expensive than futures prices.

But the futures market moves according to news headlines and sentiment, and it is currently pinning its hopes on the prospect of US-Iran talks resuming, possibly as early as this week.

For analysts, forecasting oil prices is now more speculative than ever, as uncertainties and conflicting messages from the Trump administration have made price predictions almost impossible.

For example, Goldman Sachs this week maintained its forecast for average Brent and WTI oil prices in 2026 at $83 and $78 per barrel, respectively. However, the investment bank also warned of both upside and downside risks associated with those forecasts.

According to a Goldman Sachs report cited by Reuters , low oil flow through the Strait of Hormuz is currently the biggest risk driving up prices. Analysts at the Wall Street bank estimate that oil flows are only 10% of pre-conflict levels, equivalent to 2.1 million barrels per day (bpd), and no LNG shipments have passed through the strait since the conflict began on February 28th.

Daan Struyven, head of global commodity research at Goldman Sachs, told CNBC's 'Squawk on the Street' on Wednesday that the ceasefire has reduced the risk premium and the probability of significant and prolonged supply disruptions. At the same time, flows through the strait need time to recover, so overall this remains a bullish factor compared to forecasts.

Goldman estimates the current supply deficit at around 10-11 million barrels per day, while the drop in demand may be offsetting about 3 million barrels per day.

Demand losses are already significant in Asia, particularly in the aviation and petrochemical sectors. Struyven noted that the longer the decline in demand in Asia lasts, the more it will spill over to other continents and other product markets.

Goldman Sachs maintained its price forecast from last week because the bank assumes that flows in the Strait of Hormuz will begin to recover and nearly return to normal by mid-May, while Gulf countries' output will not recover until mid-June.

Last week, Goldman Sachs warned that the average Brent crude oil price is expected to remain above $100 a barrel this year if the Strait of Hormuz remains closed to most oil tankers for another month.

According to Goldman Sachs, if the extremely restricted flow in the Strait of Hormuz lasts for more than another month, the supply from the Middle East will be severely impacted. In that case, the average Brent crude price could reach $120 per barrel in the third quarter and $115 per barrel in the fourth quarter of this year.

On the downside, Goldman Sachs estimates that production being "pinned down" in the Persian Gulf is less than previously feared. Furthermore, significantly reduced demand – due to soaring prices and shortages – is helping the market rebalance with “slightly less price increase than would have otherwise occurred.”

Other analysts also highlighted the very clear two-way risks to their outlook.

In a report released on Thursday, April 16th, ING commodity strategists Warren Patterson and Ewa Manthey stated that the oil futures market is stabilizing or declining due to hopes that the US and Iran will extend their ceasefire for another two weeks, along with the possibility of resuming negotiations to end the military conflict. However, the physical market is tightening daily as oil flows through the Strait of Hormuz have yet to resume.

ING estimates that around 13 million barrels per day have been disrupted and “with the US lockdown, that number could rise further.”

SEB, the Nordic Bank, argues that the risks to the financial institution's outlook are two-sided: faster diplomatic action could bring down oil prices, while a breakdown in negotiations or, worse, the destruction of infrastructure could push Brent crude prices above $150 per barrel.

However, in its report on Wednesday, the SEB reiterated that “the Strait of Hormuz is not solely open to the US,” as Iran may choose to maintain some degree of control even if an agreement is reached.

Huu Thanh

Source: https://baoninhbinh.org.vn/gia-dau-se-di-ve-dau-260417154758555.html