Goldman Sachs Warns of Downside Risk to Oil Price Forecasts for 2025/2026

Goldman Sachs, a leading global investment bank, has recently revised its oil price forecasts for 2025 and 2026, warning of potential downside risks. The bank's analysts now expect Brent crude oil prices to average $74 per barrel in 2025 and $66 per barrel in 2026, down from their previous projections of $81 and $74 per barrel, respectively. This revision reflects a more cautious outlook on global oil supply and demand dynamics.

The primary factors contributing to Goldman Sachs' revised forecasts are:

1. Increased production from non-OPEC nations: Goldman Sachs Research forecasts that non-OPEC hydrocarbon liquids supply (excluding Russia) will increase by 1.7 million barrels per day in 2025. Most of this growth will come from four American countries: the US, Canada, Brazil, and Guyana. This increased production contributes to the surplus on the oil market, putting downward pressure on prices.
2. High spare capacity: OPEC+ producers have high spare capacity, which may limit an increase in prices and contribute to the surplus. This spare capacity is expected to remain high in the coming years, as OPEC+ members have stated that they will only bring output back online when prices rise high enough. This high spare capacity could lead to a more balanced market, reducing the upward pressure on prices.
3. Moderate demand growth: While Goldman Sachs Research expects oil demand to grow for another decade, the growth rate is expected to be moderate. This moderate demand growth, combined with increased production, contributes to the surplus on the oil market, putting downward pressure on prices.

Geopolitical events, such as stricter U.S. sanctions on Iran's oil industry, could also influence the near-term outlook for oil prices. Goldman Sachs expects Brent Crude prices to spike to the mid-$80s early next year if Iran's oil supply declines by about 1 million barrels per day (bpd) due to stricter sanction enforcement when Donald Trump becomes U.S. President. However, it is essential to consider that the potential impact of stricter sanctions on Iran's oil industry is not the only geopolitical event that could significantly affect the oil market. Other geopolitical events, such as the ongoing conflict between Russia and Ukraine, could also influence oil prices.



In conclusion, Goldman Sachs' revised oil price forecasts for 2025 and 2026 reflect a more cautious outlook on global oil supply and demand dynamics. The increased production from non-OPEC nations, high spare capacity, and moderate demand growth contribute to the surplus on the oil market, putting downward pressure on prices. Geopolitical events, such as stricter U.S. sanctions on Iran's oil industry, could also influence the near-term outlook for oil prices. Investors should monitor these factors and their potential impact on the oil market to make informed decisions about oil investments and trading.