Goldman Sachs: Oil prices have already factored in supply disruptions from Iran, and expectations for Venezuelan supply increases are spreading

# Source: Wall Street Insights

## Dong Jing

Goldman Sachs believes that Brent crude has risen nearly $6 so far this year to above $66 per barrel, a gain equivalent to the market pricing in a sustained Iranian supply disruption of 700,000 barrels per day over the next 12 months. Option data shows that the probability of Brent hitting $70 has surged from less than 7% two weeks ago to 15%. Meanwhile, new shifts have emerged on the supply side: the price spread between heavy crude and light crude has widened by approximately $2 per barrel as the market starts to price in expectations of increased supply from Venezuela. Goldman Sachs forecasts that Venezuela's crude output will rise by 300,000 barrels per day by the end of the year.

Goldman Sachs stated that the global crude oil market has "priced in risks first", with expectations of Iranian supply disruptions already reflected in current prices.

On January 16, according to information from Zhuifeng Trading Desk, Goldman Sachs noted in its latest research report that Brent crude has climbed nearly $6 per barrel year-to-date to above $66 per barrel. Under its pricing framework, this increase is equivalent to the market factoring in a continuous Iran-related supply disruption of 700,000 barrels per day for the next 12 months.

The report further pointed out that option market data has provided additional confirmation of this risk premium: the probability of Brent crude's 3-month forward contracts hitting the $70 range upon expiration has skyrocketed from less than 7% two weeks ago to 15%, while the probability of breaking above $80 per barrel remains relatively low at 5%.

Goldman Sachs also specifically highlighted another clue on the supply side: growing expectations of rising supply from Venezuela. Meanwhile, the quality spread between heavy crude and light crude has widened by around $2 per barrel, which aligns with its assumption that Venezuela's heavy oil production will increase by 300,000 barrels per day by the end of the year.

### Iranian Risk: Spot Prices Already Reflecting a 700,000 bpd Disruption

The report indicated that the global crude oil market is pricing in significant risks of Iran-related supply disruptions:

Brent crude's rise above $66 per barrel, with a year-to-date gain of nearly $6 per barrel, is interpreted under its pricing framework as the market's valuation of a sustained Iran-related supply shortfall of 700,000 barrels per day over the next 12 months.

The framework also provided a reference: a permanent production decline of 1 million barrels per day typically lifts oil prices (based on OECD inventory fair value) by $8 per barrel 12 months after the shock, assuming OPEC does not compensate for the shortfall.

Goldman Sachs pointed out that this essentially lays out the mapping relationship between "oil price risk premium" and "potential supply gap": the current price increase corresponds not to an extreme supply cutoff, but to a disruption magnitude that the market deems likely to persist.

### Option Market: Probability of $70 Range Upgraded

Pricing in the options market has reflected such concerns more explicitly.

Data shows that the probability of Brent's April futures contracts expiring within the $70 range has jumped from less than 7% two weeks ago to 15%, though the probability of breaking above $80 per barrel remains moderate at 5%.

At the same time, the report mentioned that the call skew has risen to its highest level since the end of June 2025, when the U.S. struck Iranian nuclear facilities.

This indicates that the market is willing to pay a higher premium for upside protection, but pricing for an "uncontrolled surge" remains relatively restrained—risks have been priced in, but not to an extreme degree.

### Rising Venezuelan Supply Gains Market Recognition

Despite escalating market concerns over Iranian supply disruptions, Goldman Sachs maintained its forecast that Iran's crude oil production will remain basically stable at 3.5 million barrels per day in 2026.

In contrast to Iran, the market is pricing in an increase in crude oil supply from Venezuela.

The research report noted that the quality spread between heavy crude and light crude has widened by about $2 per barrel, which is consistent with Goldman Sachs' projection that Venezuela's heavy oil production will rise from 830,000 barrels per day in December 2025 to 1,070,000 barrels per day in December 2026.

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The above insightful content is sourced from Zhuifeng Trading Desk.

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