(Bloomberg) — Oil may rally to as much as $120 a barrel if attacks on shipping in the Middle East increase, according to Goldman Sachs Group Inc., which recommended bets on natural gas and diesel as a way to capture gains.
“Events over the last few days do suggest that the risk of shipping disruptions broadening and intensifying is an important one,” Daan Struyven, co-head of global commodities research, said in an interview on Bloomberg TV.
Crude has rallied to the highest since July, as the US and Iran remain in a stalemate over the Strait of Hormuz. In recent days, Washington attacked Iranian tankers, while Tehran declared a new restricted zone outside the waterway. American naval forces also continue to blockade the Islamic Republic’s ports, while escorting other producers’ vessels out.
In addition to Goldman’s so-called upside scenario of $120 a barrel, the bank also has a lower target of $80 should exports from the region normalize, Struyven said. Brent last traded near $97.
The standoff after more than six months of war has boosted a wide array of energy prices, with gains in natural gas and petroleum products outpacing crude oil. Industrial fuel diesel has more than doubled this year.
“While we see meaningful upside to crude oil prices, we do recommend to investors to hedge geopolitical risks by going long in global natural gas and refined-oil products,” Struyven said, referring to bets on gains. “The supply shocks are bigger than in the crude market.”
China is expected to continue acting as a “stabilizing force” in the crude market, reining in imports in response to elevated prices, according to Struyven. In natural gas and products, it isn’t playing the same role, he said.
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