Goldman Sachs said on Tuesday it expected oil prices to stay at the higher end of its forecast range, citing disappointing U.S. supply and a likely sticky geopolitical risk premium.
“Some softening in physical oil prices, large product inventory builds in Europe in March, and early signs of draws in inventories on water… reduce the upside risks to our price forecast and support our $90/bbl ceiling on Brent prices,” Goldman analysts said in a note.
Oil prices were largely steady on Tuesday after the U.S. announced plans to hit Iran with new sanctions after its weekend attack on Israel, and as Israel’s war cabinet is also set to meet for the third time in three days.
“Following Iran’s first direct attack on Israel and despite the potential for further escalation, Brent crude prices continue to hover around $90/bb,” Goldman Sachs said.
“The market reaction was likely muted because the market had already priced in a geopolitical risk premium of $5-10/bbl ahead of the weekend, which is also visible in last week’s jump in Brent call options implied volatility to a six-month high.”
U.S. Treasury Secretary Janet Yellen said that the U.S. intends to hit Iran with new sanctions in coming days due to its unprecedented attack on Israel, and it could seek to reduce Iran’s capacity to export oil.
U.S. oil futures were up about 19% so far in 2024, while Brent crude futures were up 17% for the year so far.
(Reporting by Anjana Anil in Bengaluru, Editing by Franklin Paul and David Evans)