Goldman Sachs says expensive shipping rates pose upside risk to its Brent crude price forecast.
Reuters, October 21 - Goldman Sachs said in a report released on Tuesday that global average crude oil shipping rates remain seven times higher than a year ago. With the ongoing conflict in the Middle East, these rates are unlikely to fall significantly, which adds some upside risk to Goldman Sachs' forecast for Brent crude oil prices.
The bank said that the global average crude oil shipping rate has soared from $3 per barrel a year ago to over $20 per barrel, with rates on Middle East routes rising above $35 per barrel.
Goldman Sachs pointed out that the war risk premium associated with transiting the Strait of Hormuz and ship-to-ship transfers accounts for more than half of the year-on-year increase in global crude shipping rates.
The bank stated that rising shipping rates are altering trade patterns, widening the price differentials between different crude grades, and supporting refined oil prices, but at the same time putting pressure on refiners' net margins.
The bank indicated that a rebound in oil exports from the Gulf region could ease pressure on crude prices, but if export growth is mainly driven by ship-to-ship transfers, shipping rates could rise further.
Goldman Sachs said that even in its base-case scenario—namely, Brent crude oil falls to $90 per barrel by year-end, with an average price of $80 per barrel in 2027—restoring output and stabilizing exports from the Gulf region will still rely on ship-to-ship transfers if transit through the Strait of Hormuz cannot be secured.
The bank believes that persistently high shipping rates, coupled with the potential for increased attacks on shipping, damage to oil infrastructure, and ongoing geopolitical risk premiums, could all pose upside risks to its Brent crude oil price forecasts.
The bank added that the slow recovery of refined oil exports from the Middle East indicates that marine fuel supplies may remain tight for a longer period.
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