Goldman Sachs expects Brent crude to trade in an $80–90 per barrel range until either a new agreement is reached between the United States and Iran or the conflict in the region escalates significantly through broader attacks or new targets.
Front-month Brent futures eased to the low-$80s after the United States called off planned strikes on Iran to give negotiations "one last chance", while reports suggested talks between Iran and Oman on the management of the Strait of Hormuz were in their final stages.
Goldman estimated Brent's fair value at around $80 per barrel, based on its OECD commercial inventory indicator, current demand estimates and the historical relationship between inventories and spot prices. This suggests the market is pricing in "only a modest geopolitical risk premium despite the exceptionally high uncertainty surrounding Middle East supply", the bank's strategists, led by Yulia Zhestkova Grigsby, said.
Even so, physical oil markets have continued to tighten. Goldman's global visible inventories indicator showed a 6.3 million-barrel-per-day draw over the past two weeks, which the bank attributed to lower oil flows from the Persian Gulf and the Red Sea, declining Russian exports and stronger Asian imports, particularly from China.
Oil flows from the Persian Gulf fell to 36% of pre-war levels, averaging around 9 million bpd on a seven-day moving average, down sharply from nearly 80% of pre-war levels recorded during the first half of July. Total flows through the Red Sea, including the Bab al-Mandab Strait and the Suez Canal, declined by 1.7 million bpd from the previous week.
Saudi Arabia partially offset the disruption by redirecting exports through the SUMED pipeline, which links the Gulf of Suez with the Mediterranean Sea. Flows to the pipeline's Ain Sukhna terminal increased by 1 million bpd over the past week.
Russian crude and condensate exports fell by 1.3 million bpd over the past two weeks following a shift in drone attacks from refineries to oil tankers at the end of June. Meanwhile, net Asian imports of crude and condensates rose by 5.6 million bpd over the same period, with China accounting for 2.3 million bpd of the increase. Goldman attributed the rise in imports to lower crude prices in late June and early July.
