In an October 11 report, Goldman Sachs raised its December 2026 Brent crude oil price forecast from $85 per barrel to $90 per barrel, an increase of about 6%. The bank still expects oil prices to decline as Middle East supply gradually adapts to the conflict environment, but believes persistent supply risks will slow the fading of the risk premium.
Supply risks and low inventories support the risk premium
Goldman Sachs estimates that the risk premium currently embedded in Brent crude time spreads is slightly above $20 per barrel. Persistent supply risks, low inventories, and the high sensitivity of interest rates to oil price changes are keeping physical restocking and financial hedging demand strong. Goldman Sachs expects that the gradual adjustment of Middle East supply will still bring downward pressure on prices, but a renewed escalation of the conflict could push oil prices significantly above the baseline forecast. Previously, Goldman Sachs estimated that the Brent risk premium in September was about $22 per barrel, the second-highest monthly level in history; when the Russia-Ukraine war broke out in 2022, the monthly risk premium peak did not exceed $16. The bank also estimated that a reduction of 100 million barrels in OECD commercial oil inventories raised Brent's fair value by nearly $8 per barrel.
2027 average price forecast maintained at $80, production recovery determines scenario differences
This adjustment is concentrated at the end of this year. Goldman Sachs maintained its forecast for Brent crude oil's average price in 2027 at $80 per barrel, believing that downward pressure from Gulf supply adapting faster than expected will offset the impact of a slower fading of the risk premium. Its baseline scenario assumes that the Gulf region's average daily production in 2027 will be about 300,000 barrels lower than in February 2026. If the production gap widens to 5 million barrels per day, Goldman Sachs expects Brent's average price in 2027 could reach $125 per barrel. Damage to oil infrastructure, intensified attacks on ships, and a longer-lasting risk premium are the main triggers for this upside scenario. Conversely, if the Gulf's average daily production in 2027 is 1 million barrels higher than in February 2026, Brent prices could fall to the high $60s per barrel. Faster Middle East production recovery and a faster fading of the risk premium are the main downside factors listed by Goldman Sachs. Goldman Sachs also expects WTI crude oil to average $81 per barrel in December 2026 and $73 per barrel in 2027, attributing its discount to Brent to high transportation costs from the United States to Europe.
International Energy Agency pushes for diesel reserve releases
Supply pressure has also prompted faster action at the policy level. On October 11, the International Energy Agency recommended that member countries that have not yet fully fulfilled their March joint release commitments assess whether they can accelerate the remaining releases, prioritizing diesel supply. All member countries, including those that have completed their established commitments, should assess the necessity of additional diesel releases and, if deemed necessary, specify the scale, timing, and additional nature of such releases. The International Energy Agency Governing Board will assess related progress on October 15.
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