After months of ongoing conflict in the Middle East, Goldman Sachs Group has raised its oil price forecasts for the end of this year and for 2027, citing significant supply risks, joining a number of other banks in lifting their outlooks.
Analysts including Daan Struyven and Yulia Zhestkova Grigsby said in a report that they now forecast Brent crude will reach $105 per barrel in December, up from their previous forecast of $90, and see next year's average price at $88 per barrel, 10% higher than the prior estimate. The report also raised its forecast for U.S. WTI crude.
"Significant downside risks to supply could sustain a relatively high risk premium in the near term," they wrote in the November 1 report. The report also said the market is "placing growing emphasis on the risk of heightened tensions after the U.S. midterm elections on November 3, and the subsequent potential softening of Middle East supply."
Although Middle East crude supply has largely recovered to near pre-war levels, Brent crude, the global benchmark, still climbed 14% in October, touching a six-month high. This is because the market is worried that the U.S.-Iran conflict could escalate again after the U.S. midterm elections. U.S. President Donald Trump has repeatedly hinted at the possibility of resuming airstrikes, while Iran's supreme leader has ordered senior commanders to prepare for a new round of confrontation.
Analysts said factors such as an increase in attacks on ships and damage to infrastructure could push oil prices even higher, and there are also risks related to Russia's invasion of Ukraine. They wrote: "Given that the timing and location of supply disruptions are almost impossible to predict, our current baseline scenario already assumes a global supply disruption of 1 million barrels per day in 2027."
In recent weeks, Morgan Stanley has raised its fourth-quarter Brent crude spot price forecast to $105 per barrel. ANZ Group also raised its year-end forecast for Brent crude futures to the same level. The most actively traded Brent futures contract fell on Monday to around $110 per barrel.
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