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(Bloomberg) — A recovery in Middle Eastern oil supplies could be set back if renewed tensions disrupt shipping in the Strait of Hormuz, Goldman Sachs Group Inc. said.
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Persian Gulf crude production in June was still about 10.5 million barrels a day below pre-war levels, according to Goldman estimates. “While Middle Eastern producers have started reopening their shut-in wells over the last month, Hormuz disruptions could slow down the production recovery,” analysts including Yulia Zhetkova Grigsby said in a July 8 note.
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The global energy market has been jolted this week by a resurgence in the conflict between Washington and Tehran, pushing Brent crude futures briefly back above $80 a barrel. Ship traffic through the strait has almost halted after US and Iran traded attacks for a second day, testing a fragile peace deal, which followed a spate of strikes on shipping in the waterway.
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President Donald Trump said on Wednesday that the interim peace deal between Washington and Tehran was over, while the US also revoked a waiver allowing Iranian oil sales. Still, negotiations with Iran may continue, he added.
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“The recent attacks on tankers highlight still elevated risks of crossing, and shippers may hesitate to cross under the currently unclear ceasefire status, weighing on near-term Hormuz flows,” the analysts said.
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Goldman estimates that oil flows through the Persian Gulf have already retreated closer to 70% of normal following the recent attacks on tankers, after having recovered earlier to more than 80% of pre-war flows within the first 10 days after the reopening of Hormuz.
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At present, the risks for Persian Gulf flows and prices are two-sided, it said. Shipments are expected to recover by the end of July if the 60-day negotiations continued, along with security reassurances for shippers and a fresh waiver for Tehran’s crude sales, but may drop further if the negotiations fail and attacks on tankers escalate.
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Last month, Goldman Sachs was among banks reducing its forecasts for oil prices as flows through Hormuz picked up. Its analysts have also warned of the potential for a crude glut to reappear.
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