The scale of the global oil supply problem caused by the closure of the Strait of Hormuz is now being quantified by investment banks. Goldman Sachs has issued a warning saying that current oil stocks cover only 101 days of global demand and could fall to 98 days by the end of May.
At the start of the week oil prices rose roughly 6%. Iranian targeting of vessels in the Strait of Hormuz and a fire at a petroleum facility in the United Arab Emirates raised regional tensions further. U.S. President Donald Trump's move to deploy the Navy to protect maritime traffic stands out as the most serious escalation since the ceasefire declared four weeks ago.
According to Goldman Sachs, global oil stocks are not expected to fall to minimum operational levels in the short term, but the speed of the drawdown and regional supply losses are described as worrying. Commercial refined-product stocks are also tightening: from a 50-day demand cover before the U.S.-Israel strikes on Iran, they have fallen to 45 days.
Analysts speaking to CNBC warned that if the current rate of stock decline continues, oil prices could see sharper swings during the summer. Goldman Sachs last week revised its year-end Brent forecast to USD 90 on the back of Middle East supply losses, judging that supply-side fragility will keep upward price pressure in place over the medium term.
Key Takeaways:
1. Goldman Sachs reports global oil stocks now cover only 101 days of world demand.
2. The bank expects stocks could fall to 98 days by end-May.
3. Oil prices rose about 6% at the start of the week amid Hormuz tensions and a UAE petroleum-facility fire.
4. Commercial refined-product stocks have dropped from 50 to 45 days of demand cover since the U.S.-Israel strikes on Iran.
5. Goldman Sachs has revised its year-end Brent forecast to USD 90 per barrel.
