Goldman Sachs: Oil - FJElite

The outlook remains for oil prices to moderate as Middle Eastern supply continues to adapt, although renewed geopolitical escalation leaves risks skewed significantly to the upside. The Brent December 2026 forecast has been raised to $90/bbl from $85, as persistent supply risks are expected to slow the unwinding of the risk premium embedded in futures spreads. The 2027 average forecast remains $80/bbl, balancing further Gulf supply recovery against a slower decline in geopolitical risk. WTI is expected to remain unusually cheap relative to Brent due to elevated US-Europe shipping costs.

Despite Persian Gulf exports recovering to around their 2025 average and the global market appearing broadly balanced in September, oil prices remain elevated. Low global inventories, concerns over potential supply disruptions and the sensitivity of interest rates to oil prices are encouraging physical restocking and financial hedging. Incorporating inventories held outside OECD commercial storage also raises the estimated fair value of spot Brent, reinforcing the incentive to rebuild stocks. The baseline supply outlook has consequently been revised slightly higher following September’s stronger-than-expected recovery.

Risks remain tilted to the upside, particularly in the near term, as further infrastructure damage, intensified shipping attacks or a persistent geopolitical risk premium could drive prices substantially higher. In a severe disruption scenario, Brent could average around $125/bbl in 2027 if Gulf production remains significantly below February 2026 levels. Conversely, a stronger-than-expected recovery in regional output could push prices into the $60s.