A recovery in Middle Eastern oil supplies could be set back if renewed tensions disrupt shipping in the Strait of Hormuz, Goldman Sachs Group Inc. said.
Persian Gulf crude production in June was still about 10.5 million barrels a day below pre-war levels, according to Goldman estimates. "While Middle Eastern producers have started reopening their shut-in wells over the last month, Hormuz disruptions could slow down the production recovery," analysts including Yulia Zhetkova Grigsby said in a July 8 note.
The global energy market has been jolted this week by a resurgence in the conflict between Washington and Tehran, pushing Brent crude futures briefly back above $80 a barrel. Ship traffic through the strait has almost halted after US and Iran traded attacks for a second day, testing a fragile peace deal, which followed a spate of strikes on shipping in the waterway.
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President Donald Trump said on Wednesday that the interim peace deal between Washington and Tehran was over, while the US also revoked a waiver allowing Iranian oil sales. Still, negotiations with Iran may continue, he added.
"The recent attacks on tankers highlight still elevated risks of crossing, and shippers may hesitate to cross under the currently unclear ceasefire status, weighing on near-term Hormuz flows," the analysts said.
Goldman estimates that oil flows through the Persian Gulf have already retreated closer to 70% of normal following the recent attacks on tankers, after having recovered earlier to more than 80% of pre-war flows within the first 10 days after the reopening of Hormuz.
At present, the risks for Persian Gulf flows and prices are two-sided, it said. Shipments are expected to recover by the end of July if the 60-day negotiations continued, along with security reassurances for shippers and a fresh waiver for Tehran's crude sales, but may drop further if the negotiations fail and attacks on tankers escalate.
Last month, Goldman Sachs was among banks reducing its forecasts for oil prices as flows through Hormuz picked up. Its analysts have also warned of the potential for a crude glut to reappear.
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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