Goldman Sachs (NYSE:GS) says sanctions could “meaningfully and sustainably” reduce Russian oil exports as the broker raised its guidance for spot prices for this year and 2023.
The broker said the global economy could soon be faced with “one of the largest energy supply shocks ever” as upward pressure is placed on oil prices even as demand destruction and emergency reserve releases work to ease constraints.
Goldman hiked its 2022 Brent spot price to US$135 a barrel from a previous outlook of US$98, with its 2023 forecast at US$115 up from $105bn prior.
“The West will want to avoid such an outcome, but global isolation could instead drive Russia to reduce its current account surplus and energy exports,” the broker said.
“We believe China will hold a crucial role in shaping how the oil market will rebalance, and how much Russian oil exports end up shrinking, with logistical constraints likely to prevent a full reallocation of flows for months.”
In a separate note, analysts at Barclays said the disruption of most Russian seaborne crude supplies could result in Brent surging beyond US$200 per barrel in the worst case.
"In a worst case, oil prices could climb over $200/b and TTF [gas] prices could average €300/MWH over the summer, in our view."
Goldman Sach’s updated base-case outlook is based on daily barrel disruption of 1.6mln from Russia, as Western companies are reprimanded for Russian purchases and companies like Shell leave the market behind.
This would align with the 1.6mln barrels a day lost at the peak of the 2011 Libya Civil War.
The broker said the range of possible outcomes remains extreme given the threat that a spike in oils prices causes to the global economy.