Goldman Sachs said the latest strikes in the Strait of Hormuz could slow the ramp-up in Middle East oil production, while the cancellation of the U.S. sanctions waiver could once again weigh on exports of Iranian oil, which had only recently begun to recover.
Oil prices extended gains on Thursday as the latest round of attacks and retaliation between the U.S. and Iran dented hopes for the full reopening of the Strait of Hormuz.
Brent crude futures gained 1% to $78.88 a barrel as of 0421 GMT, while U.S. West Texas Intermediate (WTI) crude gained almost the same amount to $74.34. Both benchmarks settled nearly 5% higher on Wednesday, having earlier climbed to their highest in more than two weeks.
U.S. President Donald Trump said an interim deal signed last month to end the war with Iran was “over” and reimposed sanctions on Iranian oil this week.
Goldman in a note on Wednesday said it sees two-sided risks to Persian Gulf oil flows and near-term prices.
The bank said it still expects Persian Gulf flows to return to normal by the end of July if the 60-day negotiations continue, the waiver on Iranian oil is reinstated and shippers receive security assurances. That scenario would require Hormuz flows to increase by 6.6 million barrels per day.
“While not our base case, if the negotiations fail and attacks on tankers escalate along with a potential U.S. blockade of Iranian oil, Persian Gulf flows may decrease further,” it said.
Following the recent attacks on tankers, Persian Gulf oil exports are running at 71% of normal levels, down from 83% of pre-war flows reached within the first 10 days after Hormuz reopening in June, Goldman Sachs added.
Meanwhile, the bank also noted that the ramp up of attacks on Russian refineries amid low product inventories and subdued Middle East and Asia runs amplifies their view that refined product margins will remain higher for longer.
(Reporting by Swati Verma in Bengaluru; Editing by Ronojoy Mazumdar)