Crude oil market balances between Iran war and weakening demand

The crude oil market is currently being shaped by conflicting forces, as signs of a sharp slowdown in global demand could offset supply disruptions from the Middle East, according to Goldman Sachs.

Goldman Sachs said it may downgrade its already cautious oil demand forecast by around 2 million barrels per day following the release of April consumption data from China and Western Europe. In such a scenario, Brent crude prices in the fourth quarter could be about $10 per barrel lower than the bank’s current forecast of $90.

At the same time, the war in Iran has significantly destabilized global energy flows, with crude oil shipments from the Persian Gulf through the Strait of Hormuz falling to minimal levels, effectively removing millions of barrels from the market. Since the start of the conflict, Brent has risen by more than 25%, which Goldman says has already started to destroy demand, particularly in aviation fuel and petrochemicals.

Analysts at the bank note that risks remain two-sided: prolonged disruptions could push prices higher, while weakening demand continues to exert downward pressure. “Actual oil consumption may have declined more than expected in response to higher prices,” the report said.

Additional pressure is coming from China, where crude oil imports could fall to pandemic-era levels as demand softens in the world’s largest importer. Against this backdrop, Brent traded around $93 per barrel on Monday, after closing last week at a six-week low on expectations of possible diplomatic talks between the United States and Iran.

Tags: prices