Home / Economy / Goldman Sachs warns: Global economy faces ‘largest energy supply shocks ever’

Goldman Sachs hiked its Brent price forecast for 2022 and 2023, reasoning that the global economy could be faced with the "largest energy supply shocks ever", given Russia's key role in global energy supply.

Russia is one of the world's biggest suppliers of natural gas and crude -- and investors are now fretting about potential supply disruptions. For the time being, Western governments have not included Russian oil in their wide-ranging sanctions on Moscow owing to concerns about the impact on prices and consumers, but the United States and allies are in talks about banning crude imports from Russia.

The prospect sent benchmark Brent oil prices surging to a near 14-year high of $139.13 per barrel on Monday, not far from its 2008 record pinnacle of $147.50. Continuing its rise on Tuesday, Brent surged past $126 a barrel as fears of formal sanctions against Russian oil and fuel exports spurred concerns about supply.

However, Germany, the biggest buyer of Russian crude oil, has rejected plans for an energy embargo. Replacing the vast quantities of Russian fuel and oil in the market if they has raised supply concerns about oil traders, prompting the surge in prices.

While imports of Russian crude have not been sanctioned, were such an event to take place, the United States would be alone in such move, without the participation of allies in Europe as they depend on Russia for natural gas and crude, according to a Reuters report citing sources.

"In the short term, coping with such a supply shock would require the combined help of global strategic reserves, core-OPEC, Iran, and higher prices to reduce consumption," the bank said. A slowdown in talks with Iran over its nuclear programme, which would end sanctions against its oil sales, is also adding to price pressures, as Russia's demands for a US guarantee that the sanctions it faces will not hurt its trade with Tehran. China has also raised new demands, according to the report.

Goldman raised its 2022 Brent spot price forecast to $135 per barrel from $98, and its 2023 outlook to $115 a barrel from $105.

Reports poin to over half of March loadings remaining unsold, which if sustained, could represent a 3 million barrels a day decline in Russian crude and petroleum product seaborne exports, which would be the fifth-largest one-month disruption since World War 2, Goldman Sachs said in a note dated March 7.

Meanwhile. Russia warned it could stop the flow of natural gas through pipelines from Russia to Germany in response to Berlin's decision last month to halt the opening of the controversial new Nord Stream 2 pipeline.

If all of Russia's oil exports were blocked from global markets, analysts have said prices could rise to $200 a barrel, while Russia's deputy prime minister said oil could soar to more than $300.

Oil supply disruptions come as inventories continue to fall worldwide. Five analysts polled by Reuters estimated on average that U.S. crude stockpiles decreased by about 800,000 barrels in the week to March 4.

The poll was conducted ahead of weekly inventory reports from the American Petroleum Institute, an industry group, on Tuesday and the US Energy Information Administration on Wednesday.

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