A fire erupted on Wednesday…
Oil prices dipped by 6…
Oil prices are set to average $135 per barrel this year as the world could face the “largest energy supply shocks ever” with Russian crude struggling to make it to the market, according to Goldman Sachs.
The investment bank significantly hiked its oil price forecasts for 2022 and 2023. Goldman now sees the spot Brent Crude price averaging $135 a barrel this year, up from $98 expected earlier. The forecast for 2023 is now $115 a barrel spot Brent, compared to $105 previously.
Although Russia’s exports are not under sanctions currently, many buyers, traders, insurers, and tanker owners have started to avoid purchases of Russian crude. This has already started to affect market balances.
More than half of the March loadings from Russia could remain unsold, which could mean 3 million barrels per day of Russian seaborne crude and petroleum products off the market this month. This would represent the fifth-largest disruption in oil supply in one month since World War II, analysts at Goldman Sachs wrote in a noted dated March 7 and cited by Reuters.
“In the short term, coping with such a supply shock would require the combined help of global strategic reserves, core-OPEC, Iran, and higher prices to reduce consumption,” Goldman Sachs said.
Last week, the bank said that the market hadn’t fully priced in the geopolitical risk premium.
“The market may be underestimating the risks of tighter supply on oil pricing, which remains a key risk from the ongoing conflict -- so we think the ‘risk premium’ here should probably be larger,” said Goldman Sachs when oil prices traded in the low $100s last week.
A week later, oil had already blown past Goldman’s prediction of rising to $115 over the next month. Brent traded up 3.5% early on Tuesday at above $127, while WTI Crude was up 3% at $123, as oil majors withdraw from oil trade with Russia, the U.S. considers an import ban on Russian oil, and the Iranian nuclear deal seems not-so-imminent as it did a week or two ago.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.