Reuters – Goldman Sachs stated in a note issued yesterday, Tuesday, that global crude oil freight rates remain seven times higher than their levels a year ago, and are unlikely to decline sharply as long as the conflict in the Middle East persists, raising the risk of an upward revision to the bank's Brent crude price forecasts.
Freight Rates on Middle East Routes Surge Above $35 per Barrel
The bank noted that average global crude oil freight rates surged above $20 per barrel compared to $3 per barrel a year ago, with freight rates on Middle East routes rising to over $35 per barrel.
It pointed out that the risk premium for transiting the Strait of Hormuz and war-related ship-to-ship transfers account for more than half of the annual increase in global oil freight rates.
The bank added that higher freight rates widen differentials between crude grades by altering trade patterns and supporting refined product prices, but weigh on net refinery margins.
Recovery in Gulf Oil Exports Will Raise Freight Rates If Ship-to-Ship Transfers Are the Main Export Driver
Goldman Sachs said that a recovery in oil exports from Gulf countries could lower crude prices, but it might raise freight rates if ship-to-ship transfers are the primary driver of increased exports.
It stated that even under its baseline scenario, which projects Brent crude prices to fall to $90 per barrel by the end of the year and average $80 per barrel in 2027, recovering Gulf production and stabilizing exports would still require ship-to-ship transfers in the absence of reliance on navigation through the Strait of Hormuz.
The bank sees upside risks to its Brent price forecasts due to prolonged high freight rates, alongside the potential for more severe attacks on vessels, damage to oil infrastructure, and a higher geopolitical risk premium.
Bunker Fuel Supplies May Remain Tight for Longer amid Lack of Progress in Resuming Refined Product Exports from the Middle East
Goldman Sachs added that the lack of progress in resuming refined product exports from the Middle East suggests that bunker fuel supplies may remain tight for longer.
