Goldman says Brent oil to slump to low-$50s in 2026 on glut

Goldman says Brent oil to slump to low-$50s in 2026 on glut

Goldman Sachs has revised its oil price forecasts, predicting that Brent crude oil prices will drop to the low-$50s per barrel in 2026, driven by a global oversupply of crude oil. The investment bank's latest survey, compiled by The Wall Street Journal, shows a significant downgrade from previous expectations [1].

The market consensus is that the strong summer demand is peaking, and global oil consumption is expected to slow in the fourth quarter. Additionally, growing supply from OPEC+ and South America will likely overwhelm the market by the end of the year. Goldman Sachs expects Brent crude to average $63.57 per barrel in the fourth quarter, down from $64.13 projected in July, and further drop to $62.73 in the first quarter of 2026 [1].

The U.S. shale patch is trimming capital expenditure budgets to preserve cash amid lower oil prices. American producers could further cut back on spending and activity if the prevailing forecasts of a global oversupply materialize. Efficiency gains are allowing companies to pump more or equal volumes of crude with the same or reduced expenses. However, if the glut hits the global market and prices plunge in the $50s per barrel, the U.S. shale industry will likely curb drilling activity and cut capital budgets even more [1].

The U.S. Energy Information Administration (EIA) is even more bearish than major banks in oil price projections. The EIA expects Brent to slump in the coming months, falling from $71 per barrel in July to average just $58 in the fourth quarter of 2025 and around $50 per barrel in early 2026 [1].

Despite geopolitical risks, Wall Street banks have lowered their oil price forecasts for later this year and the first quarter of 2026, expecting the glut to depress prices. The glut will diminish by the third quarter of 2026, the banks reckon, as excess supply shocks are absorbed during next summer’s peak demand period. However, banks, analysts, and market participants expect oil supply to outstrip demand over the next six months, putting additional downward pressure on prices [1].

The oil market is oversupplied while demand growth is slowing down, according to the International Energy Agency's latest monthly report. The expected glut was attributed to lower-than-expected oil consumption in several large developing world markets, combined with rising production in both OPEC+ and elsewhere, notably in the United States, Canada, Guyana, and Brazil. However, some analysts, such as Oxford Energy, have noted that the physical market does not show evidence of a glut forming anytime soon [2].

Oxford Energy's report suggests that crude oil inventories in the OECD and the United States have not shown significant increases, and the gap with the five-year average is still substantial. Additionally, oil product exports from China have not gone higher, indicating healthy demand for fuels at home [2].

In conclusion, Goldman Sachs' prediction of Brent oil slumping to the low-$50s in 2026 is supported by a combination of factors, including slowing global demand, increasing supply from OPEC+ and South America, and the U.S. shale industry's cautious approach to spending. However, the actual U.S. production will depend on how large the expected oversupply will be and how low oil prices will dip, as well as to what extent efficiencies can offset a drop-off in drilling activity and budgets.

References:
[1] https://oilprice.com/Energy/Oil-Prices/Wall-Street-Forecasts-Oil-in-the-50s-Next-Year.html
[2] https://oilprice.com/Energy/Crude-Oil/Are-the-Bears-Wrong-About-the-Looming-Glut-in-Oil.html