U.S.-Iran Negotiations Make Progress. WTI Crude Falls Below $90 Level, Goldman Sachs Says It Faces Two-Way Risks

TradingKey - Since the conflict between the U.S. and Iran, geopolitical tensions in the Middle East have repeatedly flared up, and crude oil prices have surged alongside news flow. Crude oil prices have become a "barometer" of geopolitical risk and represent a classic case of a market where price fluctuations are driven by news.

According to the latest media reports, two U.S. officials stated that negotiators from the U.S. and Iran made progress during Tuesday's talks and are moving toward a framework agreement to end the war. U.S. officials and sources familiar with the mediation warned that given the significant differences between the two sides, a deal is not yet guaranteed.

Impacted by the news, the rally in crude oil futures appears to be losing steam. WTI crude fell below the $90 threshold; as of press time (11:30 AM Beijing time), it was trading at $87.9, down 0.23%, while Brent crude continued to fluctuate around $94.8.

Market views on the future path of oil prices are divided. For example, Stratas Advisors President John Paisie stated that the Brent supply shortage is extremely severe and boldly predicted a bullish target for Brent crude prices of up to $190.

Meanwhile, U.S. Treasury Secretary Bessent is optimistic about a downward trend in oil prices, expecting gasoline prices to drop to $3 per gallon between June and September. Data shows that the current average gasoline price this week is approximately $4.1 per gallon.

Returning to a more rational view, Goldman Sachs' latest research report provided a more balanced perspective. The firm stated that the risks for WTI and Brent crude prices have shifted from one-sided to two-sided.

Regarding upside risks, developments in the Middle East and the status of crude oil transport through the Strait of Hormuz are fraught with increasing uncertainty. A decrease in shipping volumes through the strait would be a major factor pushing up oil prices. The firm currently estimates crude oil flow through the strait at only 2.1 million barrels per day, one-tenth of normal levels.

Regarding downside risks, the actual extent of production cuts in the Middle East remains lower than mid-March expectations. Goldman Sachs estimates the average crude oil production outage in the Persian Gulf was 8 million barrels per day in March, lower than the IEA's estimate of 10 million barrels per day.

On the demand side, there are also signs of weakening as the pace of global oil inventory drawdowns has slowed. The bank expects a reduction of only about 2 million barrels over the past week, significantly lower than the drawdown rate in early to mid-April.

Goldman Sachs expects the average prices of WTI and Brent crude oil to be $78 and $83 per barrel in 2026, respectively—still a gap of about $10 and $12 from current market prices—and maintains a "prudent and neutral" stance on international oil prices for 2026.