Goldman sees $120 a barrel oil risk

Goldman Sachs expects oil prices to jump to $120 a barrel if attacks on shipping in the Middle East escalate, recommending that investors bet on natural gas and diesel to capitalize on potential gains.

Daan Struyven, co-head of global commodities research at the bank, said that events in recent days indicate that the widening and escalating disruptions to shipping pose a significant risk, according to Bloomberg.

According to Goldman Sachs, natural gas and refined product prices have outpaced crude oil prices, with industrial diesel prices more than doubling since the beginning of the year.

Struyven stated that supply shocks in natural gas and refined products are greater than those in the crude oil market, making them valuable tools for hedging against geopolitical risks.

China is likely to continue playing a stabilizing role in the crude oil market by reducing its imports as prices rise, while it is not expected to play the same role in natural gas and refined products.

Impact? Escalating attacks on shipping could push the risk premium in crude oil to levels that would drive Brent towards $120, but a return to normal export levels in the region could reverse this trend towards $80. Meanwhile, refined products and gas appear more vulnerable to supply shocks.