Goldman Sachs projects that oil prices will likely decrease in 2026 as an influx of supply is expected to create a market surplus. According to a note released on Sunday, the investment bank maintained its average price forecasts of $56 per barrel for Brent and $52 for West Texas Intermediate (WTI) crude.
Oil prices: Market Dynamics Influencing Prices
The anticipated decline in oil prices is driven by a projected surplus of 2.3 million barrels per day (mb/d) in 2026. Goldman analysts highlighted that rising global oil stocks coupled with this surplus suggests that lower prices may be necessary to rebalance the market, especially if there are no significant disruptions in supply or cuts from OPEC.
Current Price Trends
As of 0412 GMT, Brent crude futures are trading at approximately $63 a barrel, while WTI is holding steady at around $59. This follows a challenging year for both benchmarks, which saw their worst annual performance since 2020, with nearly a 20% decline.
Political Factors at Play
Geopolitical tensions involving Russia, Venezuela, and Iran continue to pose risks that may influence market volatility. Goldman Sachs noted that U.S. policymakers’ emphasis on maintaining a strong energy supply alongside relatively low oil prices will likely keep any significant upside in check as the midterm elections approach.
Future Projections for Recovery
Looking ahead, Goldman expects prices to begin recovering in 2027, with the market projected to return to a deficit as non-OPEC supply growth slows and demand remains robust. For 2027, the bank forecasts average prices of $58 for Brent and $54 for WTI, a reduction of $5 from previous estimates due to increased supply from the U.S., Venezuela, and Russia.
Long-Term Outlook
Goldman Sachs anticipates a substantial recovery in oil prices later this decade, driven by growing demand projected through 2040, as years of underinvestment in long-cycle projects begin to take effect. The bank estimates that Brent and WTI prices will average $75 and $71, respectively, between 2030 and 2035, which is also $5 lower than its earlier forecast.
Investment Strategies Amid Market Conditions
Despite the potential for lower prices, Goldman maintains a cautious stance, suggesting that risks to its price forecasts are slightly skewed to the downside, primarily due to possible increases in non-OECD supply. The bank does not foresee any OPEC production cuts, even amidst geopolitical uncertainties and low speculative positioning.
Goldman also advises investors to consider shorting the 2026 Q3-Dec 2028 Brent time-spread to express their view on the expected surplus in 2026. Additionally, oil producers are encouraged to hedge against potential price declines in 2026.
