Goldman Sachs: Hamas Attacks Will Have No Immediate Impact On Oil Inventories

Investment bank Goldman Sachs says there will be no immediate major effect on near-term oil market inventories related to the terrorist attacks on Israel on Friday. Goldman Sachs has, however, added that the attacks lower the likelihood of normalization of Israel’s relations with Saudi Arabia, which would likely have boosted Saudi production over time.

Oil prices have reversed course and clawed back heavy losses over the past two weeks after Hamas’ deadly attack on Israel raised fears of a wider regional conflict. Oil prices jumped by nearly 4% in Monday’s intraday session with Brent crude trading at $87.63 per barrel after dropping to a multi-week low of $92.30 in late August. Goldman has maintained its bullish bet that Brent will climb to $100 by June 2024,  noting there has been no impact to current global oil production at this early stage of the conflict.

Previously, the nearly four-month-long oil price rally had come unstuck, with oil prices crashing spectacularly over the past weeks thanks to a smaller-than-expected decline in domestic crude supplies accompanied by a much larger-than-expected increase in fuel inventories.

Fears over demand factors are creeping back in the marketplace. Global macroeconomic headwinds and rising yields [suggest] the price of oil may have reached a short-term peak,” Spartan Capital’s Peter Cardillo has said.

Goldman is not the only bull here. According to commodity analysts at Standard Chartered, current prices remain both fragile and too low given current fundamental balances, and are likely to rebound once the steep front-of-the-curve backwardation is stripped away and the effects of over-extended speculative length Is factored in. StanChart has maintained its Brent average forecast for Q4 at $93/bbl, a level it has maintained for the past 15 months, saying its projected supply and demand balances for Q4 support that level. The commodity analysts say they don’t expect dips below USD 90/bbl to prove sustainable, suggesting oil markets have overshoot on the bearish side of things.