Following a near 20% decline in 2024, oil bulls have not found redemption. Goldman Sachs has made it clear in its latest report: 2025 will be the "darkest hour."
In a report issued last Sunday, Goldman Sachs pointed out that oil prices are likely to trend lower with volatility this year, as a tidal wave of supply leads to a market surplus. However, the bank also cautioned that geopolitical risks related to Russia, Venezuela, and Iran will continue to exacerbate market fluctuations.
The investment bank maintained its average price forecasts for 2025 Brent crude and WTI crude at $56 and $52 per barrel, respectively. It anticipates that these benchmarks will bottom out in the fourth quarter at $54 and $50 per barrel, as inventories in OECD nations accumulate.
"Rising global oil inventories, combined with our forecast of a 2.3 million barrel per day supply surplus in 2025, imply that market rebalancing will likely require lower prices," Goldman Sachs stated. "This is necessary to slow supply growth from non-OPEC producers while supporting solid demand growth, barring large-scale supply disruptions or OPEC output cuts."
On Monday, Brent crude futures hovered around $63 per barrel, while WTI crude held near the $59 mark. Last year, both benchmark oils experienced their worst annual performance since 2020, with declines approaching 20%.
Goldman Sachs analysts noted that ahead of the midterm elections, US policymakers will prioritize robust energy supply and relatively low oil prices, which will constrain the potential for a sustained price rally.
The analysts projected in the report that oil prices will begin a gradual recovery starting in 2026. By then, the market is expected to return to a supply deficit (shortfall) as non-OPEC supply growth slows and demand continues its steady increase.
The investment bank forecasts average prices for Brent and WTI in 2026 at $58 and $54 per barrel, respectively. This represents a $5 downward revision from previous estimates, attributed to increased supply projections for the US, Venezuela, and Russia in 2026 by 300,000, 400,000, and 500,000 barrels per day, respectively.
Goldman Sachs indicated that, following years of subdued long-cycle investment, a significant price rebound is anticipated in the latter part of this decade as demand continues to grow through 2040. The bank predicts that between 2030 and 2035, average Brent and WTI prices will reach $75 and $71 per barrel, though these figures are also $5 lower than its prior forecasts.
Goldman Sachs pointed out that price forecast risks are slightly skewed to the downside, considering the potential for further increases in non-OPEC supply. The bank added that, despite existing geopolitical risks and low speculative market positioning, it does not expect OPEC to implement production cuts. Goldman Sachs concluded:
"We continue to recommend that investors short the Brent calendar spread from Q3 2025 to December 2027 to position for the 2025 supply surplus. Concurrently, we advise oil producers to hedge against price downside risks for 2025."
Comments