Goldman Sachs Lowers Oil Price Target Amid Economic Slowdown

Goldman Sachs has revised its oil price forecast, lowering its target for Brent crude to $71 a barrel by December 2025. This adjustment comes as the bank anticipates slower global economic growth, particularly in the United States, due to escalating trade tensions and tariff wars. The revised forecast reflects a more cautious outlook on oil demand, which is expected to be dampened by higher costs and reduced consumer spending.

The bank's decision to lower its oil price target is driven by several key factors. Firstly, the anticipated slowdown in U.S. economic growth, exacerbated by President Trump’s tariff policies, is expected to reduce demand for oil. Higher tariffs on imported goods, including energy products, will increase costs for consumers and businesses, leading to a decrease in oil consumption. Goldman Sachs has revised its forecast for oil demand growth this year by 18% to 900,000 barrels a day, highlighting the significant impact of economic headwinds on global oil demand.



Additionally, the increased supply from the Organization of Petroleum Exporting Countries (OPEC+) and its allies is contributing to looser balances in the oil market. This surplus, combined with the anticipated slowdown in demand, is putting downward pressure on oil prices. Goldman Sachs analysts note that the medium-term risks to their forecast remain to the downside, given the potential for further tariff escalations and prolonged OPEC+ production increases.

Geopolitical factors also play a significant role in the revised oil price forecast. The bank's analysts have considered the potential impact of tariffs on Iranian oil exports, which could lead to a significant drop in supply and drive up global oil prices. However, the overall outlook remains bearish, as the economic slowdown and increased supply are expected to outweigh any potential disruptions in the oil market.

The potential implementation of additional tariffs by the US could significantly impact global oil prices and the broader energy market. Tariffs on imported goods, including energy products, would increase the cost of these goods for US consumers and businesses. This could lead to a reduction in demand for oil as companies and consumers seek to cut costs. For instance, Goldman Sachs Research forecasts that a 10% increase in the value of the trade-weighted dollar would reduce S&P 500 EPS by roughly 2%, indicating the sensitivity of the market to increased costs.

The US is a significant producer of oil, and tariffs could affect the supply chain. For example, the US has proposed a 25% tariff on imported goods from Mexico and Canada, which could disrupt the supply of energy products from these countries. This disruption could lead to increased prices as the market adjusts to the new supply dynamics. Goldman Sachs Research forecasts that non-OPEC hydrocarbon liquids supply (excluding Russia) will increase by 1.7 million barrels per day in 2025, but tariffs could alter this projection.

Tariffs could also exacerbate geopolitical tensions, which in turn could affect oil prices. For example, if the US implements tariffs on Iranian oil, it could lead to a significant drop in Iranian oil exports, driving up global oil prices. Goldman Sachs Research notes that if Iranian oil supply dropped by a million barrels a day, the price of Brent could rise to the mid-$80s per barrel by mid-2025.

The Organization of Petroleum Exporting Countries (OPEC+) and its allies have high spare capacity, which could limit an increase in prices. However, if tariffs lead to a significant disruption in supply, OPEC+ may need to increase production to stabilize prices. Goldman Sachs Research forecasts that the price of oil will increase moderately in the short term before dropping back due to producers' high spare capacity.

Tariffs could slow down the US economy, which is a major consumer of oil. A slower economy would reduce demand for oil, potentially leading to lower prices. Goldman Sachs has slashed its 2025 GDP growth forecast to 1.7% from 2.4%, citing worsening trade policy expectations. This economic slowdown could dampen oil demand and prices.

The implementation of tariffs could also affect the renewable energy sector. For example, if tariffs are imposed on solar panels from China, it could increase the cost of renewable energy projects, making them less competitive with fossil fuels. Goldman Sachs Research’s IPO Issuance Barometer assesses how conducive the macroeconomic environment is for new equity issuance, and tariffs could make the environment less conducive for renewable energy projects.

In summary, the potential implementation of additional tariffs by the US could lead to increased costs, reduced demand, supply disruptions, geopolitical tensions, and an economic slowdown, all of which could significantly impact global oil prices and the broader energy market.

The revised oil price target by Goldman Sachs underscores the interconnected nature of global economic trends and the energy market. As trade tensions continue to escalate, the outlook for oil prices remains uncertain, with potential for further downward revisions if economic conditions deteriorate. Investors and industry stakeholders will need to closely monitor developments in trade policy and economic indicators to navigate the evolving landscape of the energy market.