Goldman Sachs analysts noted in a report released last Sunday that although geopolitical risks from Russia, Venezuela, and Iran will continue to cause oil price volatility, this year's wave of crude supply will lead to a market surplus, with prices likely trending downward. The report stated, "Global crude inventories are climbing, and we project a supply surplus of 2.3 million barrels per day by 2026. This implies that, barring large-scale supply disruptions or OPEC implementing production cuts, market rebalancing in 2026 will require lower oil prices to slow the growth of non-OPEC supply while stimulating steady demand growth."
Goldman Sachs forecasts that the average prices for Brent crude and WTI crude this year will reach $56 and $52 per barrel, respectively, bottoming out in the fourth quarter at $54 and $50 per barrel. Prices are then expected to recover moderately to average $58 and $54 per barrel in 2027, supported by solid demand and a slowdown in supply growth from non-OPEC producers. The analysts specifically highlighted, "We expect U.S. policymakers will tend to maintain strong energy supplies ahead of the midterm elections, which will cap the potential for sustained oil price increases."
The bank also expressed that, based on its crude demand expectations through 2040, it maintains a "long-term constructive" view on oil. This is partly due to expectations of robust demand growth in petrochemicals, aviation, and road transportation, against a backdrop of limited alternative energy supply. A survey released by Goldman Sachs last week showed that against expectations of a global market supply surplus, 59% of over 1,100 cross-asset clients hold a pessimistic or slightly pessimistic view on crude, with market sentiment near its lowest monthly level since January 2016.
The survey, conducted from January 5 to 7, also revealed that a record number of institutional investors listed crude as their preferred short-selling target, further intensifying the overall bearish sentiment. Supported by buying interest linked to tensions in Iran, crude oil futures edged higher for a third consecutive session on Monday. The Trump administration is currently weighing its response to the deadliest crackdown on the country's theocratic rule since the 1979 Islamic Revolution.
Capital Economics analyzed in a report, "The potential for disruption to Iran's energy output poses a far greater threat to global crude supplies than Venezuela. Particularly, instability in Iran could also impact crude supplies beyond its own borders." Analysts believe that if Iran experiences oil worker strikes, disruptions to "shadow fleet" transportation, or threats of restricted shipping through the Strait of Hormuz, oil prices could rise by $15 to $20 per barrel, but such gains would likely be difficult to sustain.
At the time of writing, WTI crude futures were up 0.30% at $59.50 per barrel, while Brent crude futures rose 0.34% to $64.09 per barrel.
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