Goldman Sachs flags upside risks to oil prices in near term and into 2027

Brent crude surged above $119/bbl after Iran attacked regional energy facilities, and Goldman Sachs warns oil-price risks are skewed to the upside near-term and into 2027, noting oil could remain above $100/bbl. Goldman’s base case assumes flows gradually recover from April with Brent falling to the $70s by Q4 2026 and production normalizing within four weeks of a full Strait of Hormuz reopening, but it flags the Hormuz shock as potentially the largest on record and says sustained disruption could push Brent past its 2008 peak and widen the Brent-WTI spread.

Analysis

Major second-order supply friction will come not only from lost barrels but from increased tanker-days and insurance costs. Rerouting around the Cape or longer standby times for safer transit increases voyage duration by ~20-35%, effectively removing a fleet-sized chunk of seaborne capacity and raising delivered crude costs by a material percent at the refinery gate. This amplifies the price impact of any given physical shut-in relative to headline production lost.

A persistent premium on seaborne crude will structurally widen regional price differentials (Brent vs WTI and Middle East vs Atlantic basin), advantaging producers with pipeline/rail optionality and penalizing refiners dependent on short-cycle imports. US shale with spare takeaway optionality can arbitrage inland differentials; refiners with access to alternative feedstock (heavy sour vs light sweet) will see margin dispersion expand, creating opportunities for spread trades.

Catalysts that can unwind stress are discrete and binary: a verified, durable reopening of primary chokepoints, a purposeful release of spare barrels by non-affected producers, or an immediate jump in tanker capacity via repositioning and insurance normalization — any could compress spreads in 2-8 weeks. Conversely, infrastructure damage or prolonged sanctions on offshore assets converts a short-term shock into a multi-quarter / multi-year capacity shortfall, shifting the regime for capex and valuation multiples across E&P and shipping equities.

Key Decisions for Investors

• Tactical long US shale producers (EOG) — 3–6 month horizon. Size 1–2% NAV trade via stock or 3x3 call spread (buy 6-month 1.2x ATM calls, sell higher strike) to limit premium. R/R: target +30% on equity (or 4–6x on option premium) if inland realizations re-rate; stop -15% on equity (or max premium loss). Rationale: fastest incremental supply response and capture of widening inland Brent-WTI basis.
• Brent-WTI basis pair — long Brent exposure / short WTI exposure via BNO long and USO short — 1–3 month horizon. Initiate when Brent-WTI spread > $12/bbl (or current spread +15%). Size 0.5–1% NAV net. R/R: asymmetric — limited carry cost, target basis mean-reversion loss of $8–12 (40–80% of current basis); stop if spread narrows to entry -$4 to limit tail from OPEC spare release.
• Shipping/shipping-insurance play — long Frontline (FRO) or Scorpio Tankers (STNG) call spreads — 1–4 month horizon. Buy 3–6 month call spread to capture freight rate spike while capping premium. R/R: target +35–50% on spread if VLCC/time-charter rates stay elevated; max loss = premium. Use this to capture tanker-day shortage and higher TCEs without balance-sheet exposure.
• Convex tail hedge — buy 9–12 month Brent call spreads (long-dated BZ futures options or BNO LEAP calls spread) sized to cap portfolio downside from sustained $100+/bbl regime. Cost should be <0.5% NAV; payoff asymmetric if shocks persist across quarters; this protects macro bets and allows maintaining cyclicals exposure while limiting insurance cost to the fund.