NEW YORK: Wall Street’s biggest banks are cutting their oil price forecasts for the coming quarters, as optimism grows over a revival of Middle East crude output following an interim deal to reopen the Strait of Hormuz.
Morgan Stanley and Goldman Sachs Group Inc both announced lower guidance for crude prices in the final quarter of this year, citing the sooner-than-expected resumption of flows from the Persian Gulf.
Goldman expects a full recovery as early as the end of next month.
The bank sees Brent at US$80 per barrel in the final quarter, compared with a previous forecast of US$90, it said in a note.
Morgan Stanley sees Dated Brent, a benchmark for physical markets, averaging US$90 a barrel in the third quarter, down from a previous prediction of US$100, and US$80 in the final three months.
“Much is still to be negotiated and key risks remain, but for now, this is a key step towards a de-escalation of the conflict and higher oil exports via the Strait of Hormuz,” Morgan Stanley analysts, including Martijn Rats, said in a note, citing the interim deal between the United States and Iran.
The two countries are expected to meet in Switzerland on Friday to formally sign the agreement, the details of which haven’t been released.
Oil prices have slumped to the lowest since early March following the announcement of the deal, although traders, shipowners and producers are still seeking clarity. Goldman, however, is counting on a speedy resumption of flows.
“While full details on the agreement are unclear, we now assume that Persian Gulf exports normalise to pre-war levels by the end of July,” the bank’s analysts, including Daan Struyven, said in the note, referring to the interim deal.
Tanker flows will likely take “several weeks” to be restored as mines are cleared, commercial confidence is rebuilt among shipowners and insurers, and vessels that had been relocated return to the region, according to Morgan Stanley.
“Also, for production to be restored, export tanks need to be cleared first, which means that the pace at which empty tankers enter the Gulf is arguably even more important than laden tankers leaving,” the bank’s analysts said.
“We assume that 50% of lost production will be back by September, 80% by December, with the rest to follow in early 2027,” they added. — Bloomberg
