A week after it warned that an oil glut is coming, Goldman Sachs has done a U-turn, warning that the renewed hostilities in the Persian Gulf threaten an extended supply disruption.
“While Middle Eastern producers have started reopening their shut-in wells over the last month, Hormuz disruptions could slow down the production recovery,” the bank’s commodity analysts said, as quoted by Bloomberg. They added that Middle East oil production remains 10.5 million barrels daily below pre-war levels.
“The recent attacks on tankers highlight still elevated risks of crossing, and shippers may hesitate to cross under the currently unclear ceasefire status, weighing on near-term Hormuz flows,” the analysts also wrote, noting that prior to the latest escalation, oil flows had recovered to 80% of pre-war levels but were now down to 70% of those levels. Chances are the reversal will intensify, with Bloomberg reporting earlier today that there was no observable tanker traffic in the Strait of Hormuz, except for a U.S.-sanctioned Very Large Crude Carrier.
Last week, Goldman said that the coming global race to rebuild depleted oil inventories would not be enough to offset a massive glut that’s coming to the market next year, as traffic through the Strait of Hormuz appeared to be headed toward normalization. The assumption that the tanker traffic recovery is irreversible appeared to have been wrong.
Stockpiles of and refined petroleum products in many parts of the world have been depleted to multi-decade lows after governments raced to release strategic stockpiles in March after the Middle East crisis trapped millions of barrels of daily crude and product flows in the Persian Gulf. This led some analysts to predict an extended period of elevated oil prices as countries sought to refill their oil storage facilities while oil producers in the Gulf restarted wells.
