Goldman Sachs Predicts Strait of Hormuz Oil Normalization by 2027

Goldman Sachs Group Inc. (NYSE:GS) analyst Nikhil Bhandari predicts that oil flows through the Strait of Hormuz will normalize by the second half of 2027. In an interview with CNBC, Bhandari noted that while oil flows from the Middle East have already surpassed pre-war levels, the movement is expected to stabilize in the latter half of next year.

Bhandari also projected that crude oil prices could stabilize around $80 per barrel once the flows normalize. He highlighted that refineries outside the Middle East and Russia are expected to reach maximum stretch levels by March 2027, while those in the Middle East and Russia may take longer due to infrastructure damage.

The analyst discussed the impact of the so-called dark fleet movement, which has increased oil transportation. He emphasized that the crack spread, the profit refineries earn from converting crude oil into fuel, would need to remain significantly higher than the usual $20 spread, even as oil flows stabilize.

Regarding potential bans or restrictions on fuel exports, Bhandari expressed skepticism about their effectiveness. He noted that China is likely to restrict product exports due to depleted domestic inventories. In the U.S., he warned that export restrictions could lead to higher gasoline prices by reducing refinery operations.