Oil prices remained elevated in early trading on Tuesday as fresh warnings from investment bank Goldman Sachs suggested Brent crude could surge to $120 per barrel if the conflict in the Middle East intensifies further and disruptions in the Strait of Hormuz persist.
As at the time of writing, 07:00 am (WAT), Brent crude traded at $88.21 per barrel, down 1.13 per cent, while US benchmark West Texas Intermediate (WTI) stood at $81.89 per barrel, down 0.72 per cent, according to Oilprice.com market data.
The latest forecast comes amid growing concerns over global oil supply after renewed hostilities involving the United States, Iran and regional armed groups triggered a sharp decline in tanker movements through the Strait of Hormuz, the world's most important oil transit route.
Goldman Sachs said crude prices could climb to $120 per barrel towards the end of the year if the conflict drags on and oil flows through the Gulf remain severely disrupted.
According to the bank, "Escalation in the Middle East and the decline in estimated Persian Gulf flows to below 45% of pre-war levels have pushed oil prices back up."
The warning marks a sharp reversal from Goldman Sachs' earlier outlook at the beginning of July, when it projected an oil glut driven by weak demand and improving supply, following expectations that tensions between the United States and Iran would ease and shipping through the Strait of Hormuz would normalise.
However, that outlook has changed dramatically as hostilities intensified. Oilprice.com reported that tanker traffic through the Strait of Hormuz has fallen sharply once again, with many vessels switching off their tracking transponders to avoid detection while others have avoided the route entirely because of mounting security risks.
Adding to concerns, Yemen's Houthi movement has reportedly threatened Saudi Arabia with a naval blockade in the Red Sea, describing the move as a "maritime embargo" in response to the kingdom's actions in Yemen. The development raises fresh concerns over another key shipping corridor used to transport crude oil and refined petroleum products.
For Nigeria, sustained strength in global crude prices presents a mixed outlook. Higher oil prices could support government revenues and improve foreign exchange earnings from crude exports. However, they could also increase the cost of importing petroleum products and crude feedstock purchased in dollars, especially as local refiners and marketers continue to grapple with foreign exchange pressures.
Market analysts say investors will continue to monitor developments in the Middle East closely, warning that any prolonged disruption to shipping through the Strait of Hormuz could tighten global oil supplies further and keep crude prices elevated for the remainder of the year.