Wall Street investment bank Goldman Sachs (GS) has raised its long-term forecast for crude oil prices as the situation in Iran shows no signs of coming to a quick resolution.
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Commodities analysts at the bank now forecast that Brent crude oil, the international standard, will be at $90 a barrel at year’s end, up from a previous forecast of $80. Goldman Sachs sees West Texas Intermediate (WTI) crude oil, the U.S. benchmark, at $83 a barrel this December, up from $75 previously.
In a note to clients, Goldman Sachs wrote, “We now assume a normalization in Gulf exports by end-June (vs. mid-May prior) and a slower Gulf production recovery.” The upwardly revised outlook comes as the latest round of peace talks between the U.S. and Iran were abruptly called off in recent days.
The Strait of Hormuz
Brent crude oil is trading at $107.91 a barrel in late afternoon trading on April 27. Worries remain about the resumption of oil through the Strait of Hormuz waterway, where 20% of the world’s crude is typically shipped. The Strait of Hormuz has been effectively closed since the U.S. attacked Iran on Feb. 28.
However, Iran has reportedly offered a new proposal to the U.S. for reopening the Strait of Hormuz and officially ending the war. Commodities analysts warn that the backlog of tanker ships waiting to travel through the Strait of Hormuz could take a year or longer to clear at this point.
Is GS Stock a Buy?
Goldman Sachs has a consensus Moderate Buy rating among 12 Wall Street analysts. That rating is based on six Buy, five Hold, and one Sell recommendations issued in the last three months. The average GS price target of $974.92, implies 3.95% upside from current levels.
