Goldman Sachs forecasts oil at $100 a barrel for March

The war calculations of the oil market keep getting more and more expensive. Goldman Sachs $GS said in a Friday note that it expects Brent to average above $100 a barrel in March, a jump from the bank’s forecast just days ago and another sign that Wall Street has moved from assessing a geopolitical fear to assessing a supply squeeze.

Oil traders can flirt with triple-digit prices for a day or two while telling themselves that a scary story will have a mostly happy ending. But averaging over $100 is different. This means the market is suddenly pricing in persistence: disrupted ships, damaged infrastructure, and the world’s most important energy choke point. Brent for May was trading at $100.13 on Friday morning after hitting $119.50 on Monday, its highest level since mid-2022.

Goldman continues to argue that the market is currently experiencing a violent geopolitical crisis and a story of normalization later. In a Thursday note, the bank said it expects Brent to average $98 in March and April before falling to $71 in the fourth quarter, and the bank moved its view on West Texas Intermediate from $62 to $67, after expanding its assumptions for any disruption in the Strait of Hormuz.

But in a more severe scenario – a full month of severe disruption – Goldman said the March-April average could reach $110, and spot prices could even surpass the old 2008 high of $147 if flows remain depressed through March. The bank now expects 21 days of flows at just 10% of normal levels, followed by 30 days of gradual recovery; previously it had only modeled a 10-day disruption.

It’s the difference between a scary feeling and a scarier prediction. The market is trying to price war, shipping risks, and weather all at once, which is why things are going bad – fast.

More than 20% of global oil flows pass through the Strait of Hormuz; other analysts still expect prices to remain high in the near term as they gauge the damage caused by the war in Iran and continued supply disruption. Yes, Goldman still thinks Brent can return to the $70s later this year, but that ending comes with a giant asterisk: If the disruption continues for two months, the bank says its average estimate for Brent for the fourth quarter rises from $71 to $93.

Goldman has moved in this direction.

On March 2, days after the US and Israel bombed Iran, the bank was still describing crude oil as a “real-time risk premium” of $18 per barrel – the kind of phrase that suggests markets are nervous, but still fundamentally functional. By March 4, Goldman had raised its second-quarter Brent forecast to $76 and said its outlook was “strongly tilted to the upside,” warning that a longer disruption in the Strait of Hormuz could push prices high enough to destroy demand and prevent inventories from dangerously depleting.

Friday’s memo goes further than this warning. The bank tells its customers that the war bounty has lasted long enough to become the price of the month. That strengthens inflation bets, lowers shipping and factory costs, and gives every rate cut forecast yet another reason to appear overconfident in a world that has become very bad at reopening choke points on schedule.