Top Wall Street investment banks' commodity strategists predict that 2026 and 2027 will be challenging years for the oil industry—following a nearly 20% decline in oil prices this year.
Under the base scenario set by JPMorgan's commodities team, led by Natasha Kaneva, the international benchmark Brent crude (BZ=F) is expected to drop to $58 per barrel in 2026, while the U.S. benchmark West Texas Intermediate (CL=F) will be $4 lower. The bank forecasts a further $1 per barrel decline in 2027.
JPMorgan strategists wrote in their report: "It may sound repetitive, but since June 2023, our message to the market has been consistent: despite strong demand, supply is simply too abundant."
Goldman Sachs, led by Daan Struyven in its commodities division, provided a similar base-case projection: Brent and WTI prices in 2026 will be $56 and $52 per barrel, respectively.
However, Goldman Sachs expects oil prices to find firmer support in the coming years—rising to $80 and $76 per barrel for Brent and WTI by 2028, assuming "oversupply no longer dominates the market."
Goldman analysts noted: "We anticipate a recovery in oil prices by 2027, driven by market rebalancing, shrinking crude reserves, maturing U.S. shale production, and steady demand growth, shifting focus to 'incentivizing investment through reasonable pricing.'"
Oversupply has been the theme of this year's oil market and may persist into the next year. Despite better-than-expected demand, global supply continues to climb.
Since April, OPEC+ has been gradually easing production cuts, increasing collective output by over 2 million barrels per day. Meanwhile, U.S. shale producers are projected to hit record production levels in December, according to the EIA.
**Key Questions & Answers**
1. **What are the potential consequences of a sharp oil price decline?** A steep drop could pressure U.S. oil and gas operators, whose breakeven points are around $51 for Brent and $43 for WTI. Prolonged low prices may also curb industry investment, weakening future supply growth, and strain revenues for oil-dependent economies like Saudi Arabia and Russia.
2. **When do analysts expect the oil market to recover?** Goldman Sachs forecasts a rebound starting in 2027, with Brent and WTI rising to $80 and $76 by 2028, contingent on easing oversupply and sufficient investment.
3. **What are major banks' oil price projections?** - **JPMorgan**: $58 (Brent) and $54 (WTI) in 2026; a further $1 drop in 2027, with risks of plunging to $30+ without intervention. - **Goldman Sachs**: $56 (Brent) and $52 (WTI) in 2026; recovery to $80/$76 by 2028. - **Macquarie (Australia)**: $60.75 (Brent) and $56.63 (WTI) in 2026; expects "severe oversupply" in late 2025–early 2026, requiring OPEC policy shifts.
4. **Why is the oil market facing such severe oversupply?** - OPEC+ output has risen by 2+ million bpd since April 2025. - U.S. shale production is set to hit historic highs. - Global floating storage exceeds 1 billion barrels, the highest since 2023. The IEA projects a 4 million bpd surplus in 2026.
China’s massive crude stockpiling in early 2025 absorbed excess supply, supporting prices. Analysts note stable Middle Eastern demand and increased Indian refinery purchases of Russian Urals crude.
Macquarie analysts warned that "severe oversupply" in late 2025–early 2026 may force drastic price drops and OPEC policy adjustments.
Goldman Sachs highlighted that low 2025–2026 prices could curb non-OPEC supply, while limited new projects post-investment drought may prompt market corrections. Even state-led producers like Saudi Aramco (2223.SR) and ADNOC face profitability pressures, compounded by geopolitical risks like the Ukraine conflict.
JPMorgan cautioned that without stabilization measures, Brent could plummet to $30+ by 2027—levels unseen since the 2020 pandemic crash—potentially breaching U.S. operators' breakeven points.
However, both JPMorgan and Goldman believe the industry will act to restrict supply before such extremes. JPMorgan wrote: "The extreme price declines implied by market imbalances are unlikely to fully materialize. Adjustments will come from both supply and demand."
They expect balance to be achieved through "demand growth spurred by low prices" and "combined voluntary and involuntary production cuts."
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