- In its latest commodity research report, Goldman Sachs (GS:US) has lowered its forecast for the average price of Brent crude oil in 2027 to $80 per barrel. The bank noted that the global crude oil market is facing dual pressures of unexpectedly high supply growth and structurally weak demand, with the long-term supply-demand balance tilting towards surplus. This adjustment reflects the repricing of commodity assets amid macroeconomic cycle rotations.
- The increase in oil supply mainly comes from the release of production capacity in the Western Hemisphere and some OPEC member countries. Goldman Sachs particularly emphasized that the continuous rise in production from countries such as the United States, Brazil, Guyana, Venezuela, and the UAE effectively fills the production gap in other regions. Meanwhile, the demand structure of the world's largest oil importer is undergoing a long-term transformation, especially with the accelerated adoption of new energy and electric vehicles, leading to a slightly over 10% weakness in its oil demand. This structural slowdown may persist for several years.
- Despite lowering the long-term price forecast, Goldman Sachs still maintains its prediction for the average price of Brent crude oil in the fourth quarter of 2026 at $90 per barrel. The bank's analysis suggests that geopolitical risk premiums are providing short-term support for oil prices, particularly concerning potential supply risks involving the Strait of Hormuz. However, due to the existing global market surplus and overall demand underperformance, the actual impact of geopolitical situations on the supply chain has been largely mitigated.
Supply Expansion in Multiple Countries and Demand Structure Transformation
According to Goldman Sachs' estimates, the expansion of production capacity in non-OPEC+ countries will become the dominant force suppressing long-term oil prices in the coming years. The continuous release of technological dividends and stable marginal costs from oil-producing countries in the Americas make the global crude oil supply curve more gradual. Correspondingly, there is a fundamental change in the energy structure of major consumer countries, with the decarbonization process in the transportation sector leading to a marginal decline in traditional fuel demand. If the pace of alternative energy substitution exceeds expectations, there may be further downward pressure on the long-term average price center.
Geopolitical Premiums and the Strait of Hormuz Variables
In assessing the impact of geopolitics on the supply side, Goldman Sachs pointed out that the global supply gap in the second quarter is relatively limited, estimated at 5 to 6 million barrels per day. Although the initial logistics adjustments in this key strait led to a decline in Middle Eastern liquid fuel supply, existing inventory buffers and weak demand have mitigated the overall impact. The bank currently assumes that crude oil exports from Gulf oil-producing countries will return to normal by the end of August 2026, slightly delayed from the previous expectation of the end of June, provided that rerouted transport flows can recover to 70% of historical normal levels.
Asymmetric Volatility in Extreme Risk Scenarios
Long-term crude oil pricing still faces significant uncertainty, and Goldman Sachs has constructed a two-way extreme scenario model for this purpose. On the upside risk side, if geopolitical-induced export disruptions last longer than the baseline expectation, the average price of Brent crude oil by the end of 2026 could exceed $110 per barrel. If supply disruptions evolve into a long-term event throughout 2027, international oil prices could potentially reach the historical high range of $140 per barrel.
Downside Scenario Calculations and Asset Price Pressure
Conversely, in a downside scenario where supply recovery exceeds expectations and demand remains persistently weak, there will be room for oil prices to fall. If overseas production recovery accelerates and the transition to alternative energy speeds up again, Brent oil prices could fall to around $70 per barrel by the end of 2026. Entering 2027, as the supply-demand contradiction further amplifies, the long-term average price center may further decline to $60 per barrel. Goldman Sachs warns that if overall macroeconomic growth slows, a systemic valuation adjustment in the commodity sector may arrive earlier.
