Goldman Sachs has updated its outlook for global oil prices, citing several factors that could bring downside risks to their previous projections. In a recent report, the investment bank pointed to a combination of higher-than-expected crude oil supply and weakening demand, particularly driven by softer economic activity in the U.S. and ongoing trade tensions, as key threats to oil prices.
Adjusted Price Forecasts for 2025/2026
Goldman Sachs now predicts that Brent crude oil will average $78 per barrel in 2025 and $73 per barrel in 2026. They anticipate that the price will fluctuate within a range of $70-$85 per barrel over the next two years. Similarly, U.S. West Texas Intermediate (WTI) crude is expected to average $74 per barrel in 2025, with a slight decline to $68 per barrel in 2026.
This revision marks a shift in expectations compared to previous forecasts, which had been more optimistic about the price outlook. The bank’s new estimates reflect the potential for a broader supply surplus and demand challenges, including the impact of U.S. trade policies and weaker-than-expected data from key markets.
Risks to the Oil Market: Supply and Demand Pressures
Several factors have prompted Goldman Sachs to adjust its forecast. Firstly, the bank acknowledges that there is a risk of increased crude supply, especially if OPEC+—the group of major oil-producing nations—raises production over the next 18 months. If this scenario unfolds, the bank warns that Brent crude prices could fall to the low-to-mid $60s by the end of 2026.
Another significant concern is the potential dampening of oil demand due to slower-than-expected economic activity in the U.S. Recent data has shown weaker growth in key economic indicators, which could lead to reduced fuel consumption. Additionally, ongoing trade disputes, particularly U.S. tariffs on imports from major trading partners like Mexico, Canada, and China, are adding uncertainty to the global oil market. The imposition of a 25% tariff on imports from Mexico and Canada, along with a doubling of tariffs on Chinese goods, may have far-reaching consequences for oil demand and global trade flows.
Impact of U.S. Trade Policies
Goldman Sachs also analyzed the impact of the new tariffs imposed by U.S. President Donald Trump, which came into effect recently. While the bank does not foresee a significant impact on WTI or Brent crude prices in the short term, it highlights that the tariffs could lead to increased production costs for heavy crude oil exports from outside the U.S. This could drive up prices for U.S. refined products, particularly in coastal regions, where the cost of refining may increase due to higher input prices.
Additionally, while the tariffs are unlikely to drastically alter the global oil balance in the short term, they could complicate the broader trade environment and contribute to slower oil demand growth. Goldman Sachs has revised its forecast for 2025 oil demand growth, now estimating an increase of 1.1 million barrels per day, down from previous expectations.
Economic Slowdown and Softening Demand from China
Goldman Sachs also highlighted concerns about ongoing economic softness, especially in China, one of the largest oil consumers. The bank’s China oil demand forecast has shown some weakness, reflecting a slowdown in the country’s economic activity. While China has historically been a significant driver of global oil demand, the current environment raises questions about the sustainability of its oil consumption growth.
Conclusion
Goldman Sachs’ revised oil price forecast for 2025/2026 reflects the growing uncertainties surrounding global oil supply and demand dynamics. With higher-than-expected crude supply, weaker-than-anticipated U.S. economic performance, and trade conflicts contributing to the outlook, the investment bank has lowered its expectations for oil prices over the next two years. The potential for a supply glut and continued demand weakness could keep oil prices within a narrower range, challenging the optimism that has characterized the oil market in recent years.
Investors and market participants should closely monitor these evolving risks, as they could influence oil market dynamics and trading strategies in the coming months.
