Investing.com - Crude prices have recovered slightly of late as traders evaluated a series of differing influences, but Goldman Sachs still sees the oil markets remaining focused on price downside.
At 09:20 ET (13:20 GMT), Brent oil futures dropped 0.3% to $71.81 a barrel, while West Texas Intermediate crude futures fell 0.2% to $67.93 a barrel.
Both contracts traded at their highest levels since early-March earlier in the session, and were set to add around 2% this week.
On the negative side for prices, the Kremlin backed the idea to not hit energy infrastructure for 30 days, and the US said talks for a full Ukraine ceasefire would start immediately, potentially incrementally reducing the probability of a near-term tightening in Russia sanctions, Goldman Sachs said.
On the positive side for prices, the bank noted a nearly two-month Gaza ceasefire ended, Israel launched overnight airstrikes, the US ramped up military strikes on Yemen-based Houthi militants to secure safe passage in the Red Sea and claimed Iran would be held responsible for any continued Houthi attacks, and the Trans Niger pipeline in Nigeria (which handles roughly 15% of Nigeria’s oil export flows) was shut following an explosion.
“Despite rising tensions in the Middle East, Brent implied volatility remains very low relative to our model-implied fair value, and option markets are focused on downside with the put options implied volatility skew rising to a multi-year high,” analysts at Goldman Sachs said, in a note, dated March 18
Goldman has cut its Brent forecast range by $5/bbl to $65-$80 a barrel, but “we expect oil prices to edge up in coming months, and think that market pricing of volatility and of the upside risk from potentially lower sanctioned supply remains too low.”
That said, tariff escalation and high spare capacity skew the medium-term risks to our forecast to the downside.