Goldman projects lower oil prices in 2026 as supply swells

Jan 12 (Reuters) - Oil prices are ⁠likely to drift ⁠lower ‍this year as a wave of supply creates a market surplus, although geopolitical risks tied to Russia, Venezuela and Iran will continue to ‍drive volatility, Goldman Sachs said in a note on Sunday.

The investment bank ​maintained its 2026 average price forecasts of $56/$52 per barrel for Brent/WTI, and expects Brent/WTI prices to bottom ​at $54/50 in the last quarter as OECD inventories build up.

"Rising global oil stocks and our forecast of a 2.3mb/d surplus in 2026 suggest that rebalancing the market likely requires lower oil ​prices in 2026 to slow down non-OPEC supply growth and support solid demand growth, barring large supply disruptions or OPEC production cuts," Goldman Sachs said.

Brent crude futures ​were trading around $63 a barrel, as of 0412 GMT, while U.S. West Texas Intermediate crude holds ground at $59. ‌Last year, both the benchmarks posted their worst annual performance since 2020, with an almost 20% decline. [O/R]

U.S. policymakers' focus on strong energy ​supply and relatively low oil prices will keep ⁠sustained oil price upside in check ahead of the midterms, analysts at the bank noted.

Prices are expected to gradually start recovering in ‌2027, with the market returning to a deficit as non-OPEC supply slows down and solid demand growth continues, Goldman analysts said in a note.

The investment bank expects Brent/WTI to average at $58/54 ‌in 2027, although $5 lower than its prior estimate, citing upgrades to 2027 supply in the U.S., ‌Venezuela and Russia by 0.3, 0.4 and 0.5mb/d, respectively.

Goldman said it expects a substantial price recovery later this decade as demand grows through 2040 after years of low long-cycle investment, with 2030–2035 ‍Brent/WTI prices averaging $75/$71, $5 below its previous estimate.

Risks to the price forecasts are skewed modestly to the downside given a further increase ⁠in non-OPEC supply, Goldman said, adding that it expects no OPEC production cuts, despite geopolitical risks and low speculative positioning.

"We still recommend investors short the 2026Q3-Dec2028 Brent time-spread to express the 2026 surplus view, and oil producers hedge 2026 price downside."

(Reporting by Swati Verma in Bengaluru; Editing by Sherry Jacob-Phillips)

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