Goldman says high freight costs pose upside risk to its Brent forecast

By Reuters News

Oct 21 (Reuters) - The global average crude freight rate remains seven times higher than a year ago and is unlikely to fall sharply while the Middle East conflict persists, posing some upside risk to Goldman Sachs' Brent price forecast, the bank said in a note dated Tuesday.

  • The global average crude freight rate surged above $20/bbl from $3/bbl a year ago, with rates on Middle Eastern routes rising above $35/bbl, the bank said

  • Goldman said the war-risk premium for crossing the Strait of Hormuz and ship-to-ship transfers account for more than half of the year-over-year increase in global crude freight rates

  • Higher freight rates are expanding differentials between crude grades by altering trade patterns and lending support to prices for refined products, but weighing on refiners' net margins, the bank said

  • The bank said a rebound in Gulf crude exports may ease crude prices but push up freight rates if ship-to-ship transfers are driving the export increase

  • Goldman said even in its baseline scenario of Brent falling to $90/bbl by year-end and averaging $80/bbl in 2027, Gulf production recovery and stable exports would still require ship-to-ship transfers in the absence of reliable navigation through the Strait of Hormuz

  • The bank sees upside risk to its Brent forecast from prolonged elevated freight rates along with the potential for more intense attacks on shipping, damage to oil infrastructure and a stickier geopolitical risk premium

  • A lack of progress in restoring Middle Eastern refined product exports suggests that bunker fuel supplies may remain tight for longer, it added

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