Goldman Sachs Sees Oil Prices Remaining Elevated Despite Recent Drop

The Middle East crisis has led to fluctuating oil prices, but Goldman Sachs warns that investors may be moving too quickly to adjust their expectations. Despite a recent drop in Brent crude from $90 to the low-to-mid $80s, the bank believes that prices are likely to remain elevated until the conflict is resolved.

Goldman estimates that Brent crude will trade between $80 and $90 per barrel until the market receives a more decisive answer on the U.S.-Iran conflict. If a new nuclear agreement is confirmed, oil could break below this range, while a major escalation or prolonged disruption to regional exports would likely push prices higher.

The bank also notes that visible global oil inventories have dropped by 6.3 million barrels per day over the past couple of weeks, and Gulf oil exports have declined to just 36% of prewar levels. Furthermore, loaded tanker capacity in the Red Sea has tanked 22% since the Houthis announced a blockade.

Exxon and Chevron CEOs have also warned that the refining bottleneck is a major constraint on oil production, with Exxon estimating that roughly 5 million barrels per day of refining capacity is currently unable to meet global demand. This means that even if crude prices drop, finished fuel prices may remain elevated due to the lack of refinery capacity.