"This round of accurate" Goldman Sachs: Maintains forecast of Middle East oil flow recovery before mid-May, target oil price remains unchanged but more "two-way risks"

Goldman Sachs maintains its oil price forecast unchanged, but "two-way risk" significantly increases, investors need to re-examine their positioning logic. According to Wind Trading Platform news, on April 17, Goldman Sachs' Daan Struyven team published the latest crude oil market research report. Against the backdrop of the "reopening" of the Strait of Hormuz leading to a sharp drop in crude oil prices on the day, Goldman Sachs maintains its unchanged forecasts for the full-year average prices of Brent crude oil and WTI at $83 and $78 per barrel in 2026. Wall Street News mentioned that in last week's report, the Daan Struyven team predicted that Persian Gulf oil exports would return to pre-war levels in about a month. However, the news of the reopening of the Strait of Hormuz on Friday triggered algorithmic programs to liquidate a large number of long positions in crude oil. WTI crude oil futures fell by over 11% in a single day, dropping to the lowest level since March 10. The report emphasizes that looking at the quarterly distribution, the peak is expected to occur in the second quarter of 2026, with Brent expected to average $90 per barrel and WTI at $87 per barrel, followed by a decline each quarter, with Brent falling to $80 per barrel in the fourth quarter. The report maintains the core assumption that "Persian Gulf oil flow will gradually return to normal by mid-May." However, the risk structure previously classified by Goldman Sachs as "significantly net upward" has now been rebalanced to "two-way risk." In other words, there is both the possibility of a significant surge in oil prices due to long-term blockage of flow, as well as significant downward pressure due to unexpectedly weak demand and rapid progress in peace negotiations. This means that the logic of unilaterally going long on oil needs to be re-examined, and the value of option-based hedging tools is increasing. Risk premiums will quickly dissipate, and actual oil production cuts are lower than previously expected. The report points out that if substantive progress is made in Middle East peace negotiations, the geopolitical risk premium embedded in current oil prices will face significant downward pressure, posing significant downside risks to short-term oil price forecasts. The sharp drop in oil futures on April 17 confirms the real impact of this logic. Secondly, on the supply side, Goldman Sachs has revised downwards its estimate of the amount of oil cut in the Persian Gulf in March. Goldman Sachs currently estimates that the average daily oil cut in the Persian Gulf region in March was 8 million barrels per day, lower than its mid-March expectation of 9.7 million barrels per day. In terms of distribution among countries, the current estimates are approximately 500,000 barrels per day for Iran, 3 million barrels per day for Iraq, 800,000 barrels per day for Kuwait, 300,000 barrels per day for Qatar, 2.1 million barrels per day for Saudi Arabia, and 1.3 million barrels per day for the United Arab Emirates. Goldman Sachs believes that the higher-than-expected storage capacity in the Middle East is one of the important reasons why actual production cuts are lower than expected. This means that even if the interruption in the flow of Hormuz continues, the actual impact on global supply may be milder than expected, leading to potential downward pressure on medium-term oil price forecasts. Demand is more fragile than expected Market focus is shifting from geopolitics to economic fundamentals. Preliminary data shows that oil demand, especially the most price-sensitive parts, is rapidly declining. Goldman Sachs points out that weak demand is mainly concentrated in two areas: aviation fuel and petrochemical raw materials (such as naphtha and liquefied petroleum gas). Aviation travel is consumer elastic, and people reduce their flying when oil prices are high; while the demand for raw materials by petrochemical companies is directly driven by profits, and they reduce production when product prices cannot cover the high cost of raw materials. Why is this demand response so intense this time? Goldman Sachs gives three specific reasons. First, the pain felt by end consumers has been amplified. Currently, global refining margins (the price difference between finished products and crude oil) are at extremely high levels. This means that although crude oil prices themselves may not have exceeded historical highs, gasoline and diesel prices at gas stations and prices of chemical raw materials purchased by factories have risen even more. Goldman Sachs estimates that when Brent oil prices are around $100, if refining margins remain at current high levels, every $10 increase in fuel prices will lead to a reduction of around 90,000 barrels per day in global oil demand after 1-2 quarters. This number is much higher than the 60,000 barrels per day when refining margins are at average levels. Second, supply tightness and price pressure are hitting the most vulnerable links and regions of demand. In addition to aviation fuel and petrochemical raw materials, regions such as emerging markets in Asia and Africa, which are more sensitive to prices, are experiencing greater impact. Third, there are signs of rationing and shortages in some markets. In countries with price controls, the government controls retail fuel prices through various means such as financial subsidies, state-owned enterprises compressing profit margins, and restricting product exports. When crude oil prices exceed $80 per barrel, state-owned enterprises must compress profit margins themselves. However, this control model itself brings supply shortages and rationing risks. Upside risk: Supply interruptions may last longer than expected Although downside risks have become more apparent, Goldman Sachs also emphasizes that there are significant upside risks to oil prices, mainly from two scenarios: First, the low flow state in the Strait of Hormuz lasts longer than expected. The current 92% flow gap means that each day of deadlock is accumulating supply pressure, and if negotiations break down or the situation escalates, oil prices will face sharp hikes. Second, the production capacity of crude oil and refined oil suffers permanent damage. The potential damage to Middle Eastern refinery and oilfield infrastructure from war impacts may result in a much longer recovery time than market expectations. Based on Goldman Sachs' analytical framework, the core change in the current situation for investors in crude oil and related assets is that the risk structure has shifted from the previous "significantly net upward" to a truly two-way game. Therefore, the risk-reward ratio of simply going long on oil has significantly weakened. Volatility strategies, such as buying oil options implied volatility, and cross-commodity spread trading, such as the spread between crude oil and refined oil cracking, may be more able to accurately capture the structural characteristics of the current market. This article is reproduced from "Wall Street News," author: Bao Yilong, GMTEight editor: Zhang Jinliang.