Goldman Sachs on Oil & USD - FJElite
The past few weeks have brought welcome relief for the world’s biggest oil-importing region. Intensive negotiations between the US and Iran have increased market hopes that the Strait of Hormuz will reopen, and brought down oil prices significantly (notwithstanding another round of tit-for-tat strikes). From a late April peak of near $120/bbl, Brent crude has fallen to $72/bbl as of this writing (Exhibit 1). Our commodities team forecasts $80/bbl in Q4. While the plunge has been dramatic, oil prices remain slightly above levels prior to the war, more so for refined products where margins are likely to remain wide due to damage to facilities both in the Gulf and in Russia. Furthermore, a hawkish shift at the Fed - both in terms of new Chairman Warsh’s commentary and in terms of FOMC participants’ expectations for the funds rate - has supported the USD, which has moved back towards its...
The past few weeks have brought welcome relief for the world’s biggest oil-importing region.
Intensive negotiations between the US and Iran have increased market hopes that the Strait of Hormuz will reopen, and brought down oil prices significantly (notwithstanding another round of tit-for-tat strikes).
From a late April peak of near $120/bbl, Brent crude has fallen to $72/bbl as of this writing (Exhibit 1).
Our commodities team forecasts $80/bbl in Q4.
While the plunge has been dramatic, oil prices remain slightly above levels prior to the war, more so for refined products where margins are likely to remain wide due to damage to facilities both in the Gulf and in Russia.
Furthermore, a hawkish shift at the Fed - both in terms of new Chairman Warsh’s commentary and in terms of FOMC participants’ expectations for the funds rate - has supported the USD, which has moved back towards its March highs (Exhibit 2).