Goldman Sachs has lifted its Brent and WTI crude oil price projections by US$5 per barrel each, attributing the revision to anticipated Middle East shipping disruptions extending into 2027. The increase, however, remains conservative, reflecting stronger-than-expected market adaptability and a steady recovery in regional supply.
Per insights from the trading desk, the investment bank's latest research note dated September 7 raised its December 2026 Brent/WTI forecasts to US$85/US$80 per barrel and its 2027 full-year projections to US$80/US$75 per barrel. The report highlighted that oil and shipping markets are increasingly pricing in a prolonged Middle East conflict, with Brent spot futures having climbed to US$97. Market-implied probabilities for Brent surpassing US$100 by March 2027 have jumped to approximately 25%, up from around 6% a month earlier.
Despite extending its assumptions on shipping interruption duration, the upward revision to price forecasts remains limited. Two principal factors underpin this restraint: OECD commercial inventories have shown minimal drawdown since the conflict began, and the global market deficit has narrowed significantly—from roughly 7 million barrels per day (bpd) in March 2026 to about 1 million bpd by the third quarter of 2026—underscoring the market's remarkable resilience.
Why the Price Revision is Cautious: Two Key Buffers
Goldman Sachs attributes the restricted price forecast increase to two core reasons.
First, the resilience of OECD commercial inventories has exceeded expectations. These onshore stockpiles serve as a crucial predictor for crude prices, yet they have seen almost no substantial drawdown since the war's onset. As of end-August, the bank's tracked OECD commercial inventory counter stood at 11.9 billion barrels above its July supply-demand balance estimates. Global visible inventories have declined by a total of 543 million barrels since the conflict started, but only about 26 million barrels came from OECD commercial storage. Nearly 200 million barrels were drawn from OECD strategic petroleum reserves (SPR) and oil in transit, with an additional 80 million barrels sourced from China. This concentration of inventory consumption in non-commercial categories offers relatively limited direct support to prompt Brent prices.
Second, the adaptive recovery in Middle East supply is steadily progressing. Goldman Sachs anticipates continued supply restoration driven by an expansion of 'dark flows,' new pipeline capacity coming online by end-2027, and the gradual deployment of spare capacity by the UAE and Saudi Arabia. Persian Gulf liquefied petroleum output has recovered from a low of 14.3 million bpd below February 2026 levels in April to a deficit of 8 million bpd in July. The bank estimates that by end-2027, an additional 3.8 million bpd of effective pipeline capacity bypassing the Strait of Hormuz will be added, primarily from the UAE's West-East pipeline expansion (+1.8 million bpd) and Saudi Arabia's Yanbu port expansion (+2.0 million bpd).
Low Inventories Do Not Necessarily Signal a Price Surge
Although global visible inventories and OECD strategic reserves are at historic lows, Goldman Sachs argues this does not automatically imply imminent sharp price spikes, citing three supporting points.
Historical precedent: The historical correlation between visible inventories and oil prices is weak. In November 2024, when global visible inventories hit their lowest point on record (with the sample period starting in 2017), Brent prices were just US$76. OECD commercial inventories measured in days of demand—a more robust price indicator—currently remain 16% above the 2003 average, a year that marked the historical trough for this metric.
Inventories are not depleted: The bank estimates that global onshore oil inventories have declined from 9.1 billion barrels pre-war to 8.69 billion barrels currently, but this remains well above the estimated minimum operational level of 4.2 billion barrels. There is no imminent risk of supply exhaustion in the near term.
China's price sensitivity: China's net crude imports remain down approximately 30% year-on-year. This price elasticity will likely cap upside moves and provide support during downturns. Goldman Sachs estimates that if China maintained stable imports between March and August 2026, Brent's fair value would be US$10 to US$15 higher. The sustained price sensitivity of Chinese demand is supported by massive investments in electric vehicles, electric trucks, and coal-based petrochemical facilities, which have significantly enhanced the economy's flexibility to operate with reduced oil dependence.
Price Risks Skewed to the Upside
Goldman Sachs explicitly states that risks to its price forecasts are significantly tilted toward the upside, particularly in the near term.
In the upside scenario, if Persian Gulf average production in 2027 remains 4 million bpd below pre-war levels—compared to the baseline assumption of 500,000 bpd lower—Brent could break above US$120 per barrel. The bank views further escalation of shipping attacks in the Strait of Hormuz and the Red Sea as the most likely trigger for this scenario.
Conversely, in the downside scenario, if Persian Gulf production averages 1 million bpd above pre-war levels in 2027, Brent could fall into the US$60 range.
From a trading strategy perspective, Goldman Sachs continues to recommend hedging geopolitical risk through holding European diesel forward spreads from March to December 2027. Should outages at Russian or Middle Eastern refineries persist, this spread has the potential to appreciate by over 100% from current levels.
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