Goldman Sees Risk That Oil Will Hold $80+ on Iran, Hedging Moves

(Bloomberg) -- Goldman Sachs Group Inc. said there’s a risk oil will hold above $80 a barrel toward the end of the year, striking a slightly more bullish tone than it did a week ago, as Iran’s exports plunge and producers pull back from hedging.

Oil futures have gained recently, driven by “one-way financial flow from both consumers and investors,” analysts including Jeff Currie wrote in a report. “Without producer selling, the two-year forward oil price has rallied to $75.50 a barrel, as consumers and investors hedge oil price risks associated with Iranian sanctions.”

Goldman Sees Risk That Oil Will Hold $80+ on Iran, Hedging Moves

Oil prices across the futures curve have been rising as supplies from Iran are rapidly lost from the market, fueling concerns about spare production capacity elsewhere. Shipments of crude and condensate from the Persian Gulf country fell to a two-and-a-half year low last month, Bloomberg tanker tracking showed. Iran’s rivals may not be able to make up for the shortfall, Goldman said.

Brent crude for December 2020 has gained 29 percent over the past six months, reaching a 3 1/2 year high of $75.50 a barrel on Monday. Contracts for the nearest month rose 25 percent over the corresponding period.

Goldman’s Views

Here’s how Goldman Sachs’ perspective on the oil market shifted in the past week:

October 2September 25
  • “The risks between now and the end of the year are that long-dated oil prices drift higher not lower which would end up keeping spot prices above our $80/bbl forecast”
  • “We expect Brent prices to stabilize back in their $70-80/bbl range into year-end”
  • “These concerns arise from the potential for Iranian export losses to exceed OPEC+ production capacity. Such concerns are physical realities over the next several months”
  • “We continue to expect that production from other OPEC producers and Russia will offset losses out of Iran, as has been the case so far”
  • “Weak timespreads and rising long-dated prices support the view the market is pricing tomorrow’s problem, not today’s problem.”
  • “We believe another supply catalyst beyond Iran would likely be needed for prices to meaningfully break to the upside.”

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