Goldman Sachs has announced an upward revision to its crude oil price forecasts, even though Middle East production is continuing to recover in line with the bank's earlier expectations. The revision rests on two interconnected reasons: first, substantial downside supply risks are likely to keep a high risk premium in place in the near term; second, Goldman's newly introduced "global supply disruption reserve" captures elevated medium-term disruption risk and has led the bank to lower its medium-term global oil production forecast.
Specifically, Goldman raised its December Brent forecast to US$105 per barrel from US$90, and its WTI forecast to US$94 from US$81. For 2027, it lifted its average price forecast to US$88 for Brent from US$80, and to US$78 for WTI from US$73.
October's Rally Almost Entirely Driven by Risk Premium, Not Fundamentals
Goldman estimates that the implied risk premium has jumped to roughly US$27 per barrel, which explains the bulk of October's rise in front-month Brent futures to US$118. By contrast, the bank estimates that Brent's fair value was essentially unchanged in September and October, holding in the US$90 range, because the main variable determining fair value—global inventories—was broadly flat. Middle East supply and global oil demand have each adapted to elevated shipping risks and high oil prices, keeping global production and consumption roughly balanced over the past two months.
Goldman used a rule of thumb to quantify the degree of panic currently priced into the market: a supply loss of 1 million barrels per day sustained for six months lifts Brent by slightly more than US$5. On that basis, the US$27 premium implies the market has already priced in a 5 million bpd month-on-month decline in Middle East output lasting six months. Meanwhile, December 2027 Brent futures rising into the high US$80s and December 2028 contracts rising to US$80 indicate growing concern about the persistence of weak Middle East exports—possibly stemming from damaged infrastructure or repeated escalation of shipping attacks.
Adaptation Mechanism: Global Liquids Market Broadly Balanced in September and October
Goldman estimates that although Persian Gulf production was hit by 4.4 million bpd in September and October relative to the 2025 average, the global liquids market remained broadly balanced during that period—a sharp contrast with the 7.3 million bpd deficit in March. The shock was largely offset by three factors: a 1.1 million bpd surplus in 2025, a 2.1 million bpd increase in non-Gulf production, and a 1.3 million bpd decline in global oil demand.
Export data corroborate this adaptation: on a 14-day moving average basis, Goldman's estimated crude exports (including dark fleet shipments) have been at or above the 2025 average in recent weeks, both for Persian Gulf exporters and globally, despite some pullback in recent days.
Post-Midterm Escalation Path: Polymarket Implied Probability Rises to About 75% by Year-End
The reason the risk premium has surged across the entire crude futures curve is that the market is increasingly pricing in escalation after the US midterm elections on November 3 and the resulting weakness in Middle East supply. Citing Polymarket implied probabilities, Goldman says the probability that the "US-Iran ceasefire ends due to escalation" rose from 10% before the election to about 50% around November 15, and to about 75% by year-end.
Market participants are focused on three possible US and/or Israeli military actions against Iran. The first is a strike on underground nuclear facilities such as Pickaxe Mountain to degrade Iran's nuclear capability—US President Donald Trump said on October 15 that the US might have to strike this site linked to Iran's nuclear program. The second is a strike on missile facilities near the Strait of Hormuz, such as Bandar Abbas, to weaken Iran's ability to hit ships. The third is broader strikes on Iran's energy infrastructure, such as power plants and Kharg Island, to force Iran's leadership to accept US demands in negotiations.
Goldman notes that the risk of Iran and its allies striking Gulf Cooperation Council countries' oil infrastructure could be highest in the third scenario. Iran has also signaled it could target US military bases as well as other regional infrastructure including undersea cables, ports and desalination plants.
Global Supply Disruption Reserve: 1 Million bpd in 2027
The Middle East conflict and the Russia-Ukraine conflict, combined with broader geopolitical fragmentation, have created elevated disruption risk. Because the timing and location of disruptions are nearly impossible to predict, Goldman's base case now incorporates a 1 million bpd global supply disruption reserve for 2027—meaning its 2027 global oil production baseline is 1 million bpd below the sum of its country-by-country baselines. This reserve mainly captures the possibility of larger-than-baseline disruptions in Persian Gulf output.
In the country-by-country baselines, Persian Gulf oil production excluding Iran recovers to the 2025 average in the first quarter of 2027 and to February 2026 levels in the second quarter, while Iran's production lags significantly. The reserve also covers the non-zero probability of above-baseline disruptions in other high-risk regions, especially Russia, Kazakhstan and, in Africa, Nigeria, Libya and Sudan.
The 1 million bpd assumption is slightly above the median of 700,000 bpd for "unexpected global oil production losses" in modern history (sample from January 2012 to September 2026). Goldman's rationale is that the ongoing US-Iran and Russia-Ukraine conflicts imply above-normal disruption risk. For reference, the three major global oil supply shocks since 1980 are: Iraq's invasion of Kuwait in 1990 (a 6.3% shock to annual global output), the Iran-Iraq War in 1980 (5.9%), and the 2026 Hormuz crisis (5.5%).
Risks More Symmetric but Still Net Tilted to the Upside
Goldman says the risks to its revised price forecasts are more balanced than before but still retain an upward tilt.
Upside scenario: if average Gulf production in 2027 is 3.5 million bpd below its 2025 average (versus 1.1 million bpd above in the base case), Brent could reach US$140 per barrel, with a 2027 average of about US$130. The most likely upside triggers are intensified shipping attacks, damaged oil infrastructure and a more persistent risk premium.
Downside scenario: if average Gulf production in 2027 is 2.5 million bpd above 2025 levels and the disruptions assumed in the global supply reserve do not materialize, Brent could fall into the US$60 range in 2027. The most likely downside triggers are a faster recovery in Middle East production and/or a faster decline in the risk premium, for example through a diplomatic agreement the market views as credible and sustainable.
In its modeling, Goldman assumes, based on the historical pattern that slightly more than 80% of the risk premium carries over into the following month, a premium of US$16 in the fourth quarter of 2026 and US$7 in the second quarter of 2027. It also assumes that the US$9 structural boost to long-term fair value applied at the start of the war persists throughout the forecast period—rising structural disruption risk to supply and spare capacity requires higher prices to incentivize production.
Forecast Table: Upgrades at the Front End, Downgrades at the Back End
Goldman's full forecast table shows the upgrades are concentrated at the front end. The quarterly Brent path is: US$108 in Q4 2026 (previously US$95), US$98 in Q1 2027 (previously US$87), US$90 in Q2 (previously US$82), US$84 in Q3 (previously US$77) and US$79 in Q4 (previously US$75). On a monthly basis, November is US$110 (previously US$95) and December is US$105 (previously US$90).
For annual averages, 2026 is raised to US$93 from US$90 and 2027 to US$88 from US$80. Notably, the back end is downgraded: the 2028 Brent average falls to US$73 from US$75 and 2029 to US$74 from US$75; WTI falls to US$66 from US$70 in 2028 and to US$69 from US$70 in 2029.
This is consistent with Goldman's judgment that its base case remains below the forward curve—the bank assumes the extremely high risk premium gradually eases and Persian Gulf production continues to recover. Its 2027 Brent baseline of US$88 is below the forward curve of about US$94 for the same period.
Market Background
The report was published on November 1. In the prior trading session on October 30, the December Brent contract settled at US$117.64 per barrel, up 2.40%, after touching US$118 intraday, a high since April. The December WTI contract settled at US$104.12, up 2.08%. The seven core OPEC+ members decided at an online meeting on November 1 to keep production quotas unchanged for December.
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