Brent crude oil price analysis as Goldman Sachs boosts forecast

Brent crude oil price held steady on Monday as the Iran war continued. It jumped to $112, up by 91% from its lowest level this year. It is hovering near the year-to-date high of $119.50, and analysts at Goldman Sachs believe it has more upside to go in the coming weeks.

Goldman Sachs boosts crude oil price forecast 

Analysts at Goldman Sachs, a top Wall Street bank, boosted their crude oil forecast, pointing to the ongoing Iran war and the closure of the Strait of Hormuz.

The bank now expects that Brent crude oil price will average $85 this year, up from an earlier estimate of $77. Similarly, the bank estimates that the West Texas Intermediate (WTI) will average $79 from the previous estimate of $72.

The bank estimates that flows through the Strait of Hormuz will remain at only 5% of normal markets for six weeks followed by a gradual recovery.

This report came after President Donald Trump warned that the United States would bomb Iran's power infrastructure if the country failed to reopen the Strait of Hormuz. 

Iran then responded, saying that it would shut the Strait until it is compensated. It also threatened to attack the infrastructure of other countries in the Middle East.

An escalation in the Iran war will be bullish for crude oil prices because of its significance in the industry, with between 20% and 25% of oil passing through it each day.

Other analysts believe that Brent crude oil price has more upside to go in the near term. For example, Jeff Currie, a top analyst at Carlyle, warned that there was a disconnect between the prices on digital platforms and what is happening in the real market. He noted that oil was trading at over $150 a barrel in some markets.

Still, on the positive side, Donald Trump also noted that the US had achieved its war objectives and that it was considering winding it down. In theory, such a move would be bearish for crude oil prices. 

In reality, Iran will also have a role on when the war ends as officials believe that ending it prematurely will lead to more attacks in the next few months. As such, officials want oil to jump and hit $200, a move that will punish the US and its allies.

The US has implemented more measures to lower oil prices. For example, it has eased sanctions against Iran and Russia, a move that will bring millions of barrels online. Together with the IEA, countries are now releasing 400 million barrels of oil.

Brent crude oil price technical analysis 

Crude oil price chart | Source: TradingView 

The weekly chart shows that the Brent crude oil price has rebounded in the past few weeks. This rebound happened after it formed a giant falling wedge pattern, which is made up of two descending and converging trendlines.

It is about to form a golden cross, which happens when the 50-week and 200-week Exponential Moving Averages (EMA) cross each other. A golden cross is one of the most common bullish signs in technical analysis.

However,  there are signs the oil has become highly overbought, with the Relative Strength Index (RSI) moving to 85. The MACD and the Stochastic Oscillator have also continued rising this month.

Therefore, oil may experience a pullback as Trump will likely chicken out on his pledge to bomb Iran's energy infrastructure. If this happens, it may drop to the key support level at $100 in the near term.

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