Oil prices fell on Thursday as renewed hopes of US-Iran negotiations offered some relief, even as Wall Street warned that Brent crude could lose more than a fifth of its value if the Middle East risk premium fades.
Brent declined 1.1% to $114.10 a barrel by 03:51 GMT, while West Texas Intermediate slipped 1.3% to $101.45.
Goldman Sachs expects Brent to fall to $90 by December, implying roughly 21% downside from Thursday’s level.
The bigger question is why oil remains so expensive when Middle Eastern crude exports are recovering and fresh US data point to weaker petrol demand.
Why Goldman sees a $27 fear premium in oil prices
Goldman estimated last week that roughly $27 a barrel of Brent’s value reflected fears of future supply disruptions rather than current shortages.
The bank places Brent’s underlying fair value near $85 and expects prices to retreat towards $90 by year-end.
Daan Struyven, Goldman’s co-head of global commodities research, explained in the bank’s Exchanges podcast that refiners were securing barrels ahead of potential shortages, while financial investors bought oil to hedge against energy-driven market losses.
That precautionary buying has supported prices despite recovering Middle Eastern crude shipments.
JPMorgan is similarly cautious. In research on Tuesday, commodities analysts including Natasha Kaneva estimated Brent’s fair value at $94.
They concluded that geopolitical uncertainty better explained the nearly $20 gap than elevated shipping costs, although such premiums are difficult to measure precisely.
Oil prices today: US petrol inventories expose signs of weakening demand
Wednesday’s US inventory report added another concern for investors betting on sustained high oil prices.
Petrol inventories unexpectedly increased by 3.9 million barrels in the week ended 23 October, compared with expectations for a 900,000-barrel decline.
Implied petrol demand fell by 622,000 barrels per day, while overall petroleum-product demand declined by just over 1 million barrels per day.
Kpler’s lead oil analyst Matt Smith, in comments published by WSAU, highlighted the sharp pullback in petrol consumption even as demand for distillates strengthened.
The International Energy Agency has also warned that persistently expensive fuel is damaging consumption.
Its October outlook projects global oil demand will decline by an average of 2.6 million barrels per day in 2026, reflecting higher prices and deteriorating economic conditions.
Could Brent fall to $90, or are supply risks still too high?
The bearish outlook faces one major obstacle: inventories remain critically low.
US crude stocks declined by 1.9 million barrels last week, while distillate inventories fell by another 1.5 million barrels.
The IEA estimates global observed oil inventories were 509 million barrels below end-February levels in September.
Goldman also warned that Persian Gulf exports of refined products, including petrol and diesel, remained at roughly 40% of their 2025 average.
Struyven cautioned that renewed attacks on shipping routes or energy infrastructure could keep prices elevated despite improving crude supply.
A durable diplomatic settlement could bring JPMorgan’s $94 valuation and eventually Goldman’s $90 forecast into focus.
However, fresh disruptions could sustain Brent above $110.
Ultimately, oil’s direction may depend on whether traders stop paying for a feared shortage or face another genuine supply shock.
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