Investing.com -- Goldman Sachs said it expects Brent crude to trade within an $80-90 per barrel range until there is either confirmation of a new U.S.-Iran deal or a significant escalation in attacks and targets in the region.

Spot Brent futures retreated to the low-to-mid $80s after the U.S. canceled planned attacks on Iran to give negotiations a "last chance," with reports indicating that Iran’s talks with Oman over management of the Strait of Hormuz are in their final stages.

Goldman Sachs estimated the fair value of Brent spot prices at around $80 a barrel, based on its OECD commercial stocks counter, current demand estimates, and the historical relationship between inventories and spot prices. This indicates the market is pricing in "only a moderate risk premium despite still very high uncertainty about Mideast supply," strategists led by Yulia Zhestkova Grigsby said.

Even so, the physical oil market has been tightening. Goldman’s global visible stocks counter showed a drawdown of 6.3 million barrels per day over the past two weeks, which the bank attributed to reduced flows from the Persian Gulf and Red Sea, lower Russian oil exports, and stronger Asian imports, particularly into China.

Persian Gulf oil flows fell to 36% of pre-war levels, or roughly 9 million barrels per day on a seven-day moving average, down sharply from nearly 80% of pre-war levels in the first half of July. Total Red Sea flows through the Bab-al-Mandab strait and the Suez Canal declined by 1.7 million barrels per day week-on-week.

Saudi Arabia has partially offset the disruption by redirecting flows through the SUMED pipeline, which connects the Gulf of Suez to the Mediterranean; flows to the pipeline’s Ain Sukhna terminal rose by 1 million barrels per day over the past week.

Russian crude and condensate exports declined by 1.3 million barrels per day over the past two weeks following a shift in drone attacks from refineries toward oil tankers in late June. Meanwhile, Asian net imports of crude and condensate rose by 5.6 million barrels per day over the same period, with China accounting for 2.3 million barrels per day of that increase, which Goldman linked to lower crude prices in late June and early July.

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