Oil News: Goldman Sachs Warns of $20 Oil Spike if Iran’s Production Is Hit

Oil Prices Surge as Middle East Conflict Escalates, Supply Risks Mount

Light crude oil futures spiked higher on Friday, moving past the critical 200-day moving average at $73.18, a bullish signal for traders eyeing upward momentum. Support levels are firming around $73.18 and $71.45, while the market’s strong position above a major retracement zone at $72.21 to $69.79 suggests continued upward potential. With upside targets of $76.37, $77.76, and $80.71 in sight, traders are now focused on how geopolitical tensions will affect short-term price action.

At 11:20 GMT, Light Crude Oil futures are trading  $74.78, up $1.07 or +1.45%.

Middle East Conflict Drives Oil Prices Higher

Oil prices are surging as traders weigh the potential for disruptions in crude flows caused by the ongoing Israel-Hamas conflict. The prospect of Israeli strikes on Iran’s oil infrastructure in response to Tehran’s missile attacks on Israel has raised fears of a broader regional conflict. U.S. President Joe Biden’s comments on Thursday, discussing the possibility of supporting Israeli action against Iran, pushed oil prices up by 5%.

Both Brent and WTI benchmarks are on track for weekly gains of about 9%, as the market prepares for possible supply shocks. The current focus remains on Iran, a key OPEC member producing nearly 4 million barrels per day. Any disruption to its oil infrastructure, especially around Kharg Island, could significantly tighten the global supply.

Russian Urals Prices Rally Amid Middle East Fears

Russian Urals crude, which has mostly traded above the Western-imposed $60 price cap this year, saw prices rise back to $65 per barrel. This is largely due to escalating fears that the Middle East unrest will affect global oil flows, which has buoyed the broader oil market. Despite wider discounts and higher freight rates, Urals prices continue to exceed the cap, supporting Russia’s oil revenues amid the sanctions regime.

Freight costs from Russian ports to India have also risen, further pressuring transportation costs as oil shipments increase before winter. Discounts for Urals oil have widened slightly but remain minimal, reflecting continued strong demand from buyers like India.

Goldman Sachs Warns of $20 Oil Spike on Potential Iran Disruption

Goldman Sachs has warned that oil prices could jump by as much as $20 per barrel if Iranian production takes a hit from the escalating conflict. Analysts estimate that a sustained loss of 1 million barrels per day from Iran could trigger this surge, especially if OPEC+ does not intervene with increased output.

While OPEC+ could theoretically offset some of the lost supply, the current conflict has raised alarm over the potential shutdown of the Strait of Hormuz, a critical chokepoint through which nearly 20% of global oil passes. Any disruption here could propel Brent prices above $100, with some analysts even forecasting prices of $150 per barrel in the event of a full-scale regional war.

Market Forecast: Bullish Outlook as Geopolitical Risks Loom

Given the escalating tensions in the Middle East and the potential for severe supply disruptions, the outlook for oil prices remains bullish. Key resistance levels at $76 and $80 are likely to be tested in the coming weeks, with further upside possible if the situation deteriorates. Traders should brace for potential volatility, particularly as geopolitical risks overshadow the ample supply forecasts from OPEC and other producers.