Goldman Warns Oil Could Hit $120 as Middle East War Drags On

Crude oil prices could surge to $120 per barrel towards the end of the year if the war in the Middle East extends and the Strait of Hormuz remains closed for longer, Goldman Sachs has warned in its latest prediction in response to geopolitical developments in the Middle East. "Escalation in the Middle East and the decline in estimated Persian Gulf flows to below 45% of pre-war levels have pushed oil prices back up," Goldman's commodity analysts said in a note, as quoted by Bloomberg. This is not the first bullish oil price prediction from the investment bank, even though just a few weeks ago Goldman's commodity analysts were warning of an oil glut due to weak demand and ample supply, assuming the worst of the war between Iran and the United States was over. The coming global race to rebuild depleted oil inventories will not be enough to offset a massive glut that's coming to the market next year, as traffic through the Strait of Hormuz appears to be headed toward normalization, Goldman said in the beginning of July. [GooglePreferredSource] Since then, however, that normalization has reversed quite dramatically and now the Houthis in Yemen appear to have entered the chat, threatening Saudi Arabia with a naval blockade in the Red Sea. The kingdom is exporting most of its oil from the Red Sea port of Yanbu, pumping the oil via its East-West pipeline to bypass Hormuz. The group called the blockade a "maritime embargo", which was a response to Saudi Arabia's siege of Yemen, according to the Houthis. Even before that, however, traffic via the Hormuz was back to almost non-existent, with Iran striking U.S.-affiliated ships and the United States targeting Iranian-linked vessels. Since the collapse of the June ceasefire, most vessels attempting to brave the waters in the Strait of Hormuz have done so in the so-called dark mode with transponders off to avoid being detected. However, the numbers of those vessels are dwindling fast, according to ship-tracking data. By Irina Slav for Oilprice.com