Oil prices are expected to decline in 2026 as global supply continues to grow, pushing the market into a deeper surplus, according to Goldman Sachs estimates. The bank predicts that the same pattern observed in 2025 will continue, where the abundance of production outweighs geopolitical risks, limiting the chances of achieving sustainable price increases.
The bank noted that Brent crude prices fell by about 14% year on year in 2025 despite temporary spikes due to geopolitical tensions, forecasting a repeat of this scenario in the upcoming year. The analyst team, led by Dan Stroeven, expects the average price of Brent crude to be around $56 per barrel, with West Texas Intermediate at about $52 in 2026, compared to current futures market predictions of $62 and $58 respectively, amidst a supply surplus of around 2.3 million barrels per day.
Strategists believe that the rise in global oil inventories indicates that market rebalancing will require lower prices during 2026, unless significant supply disruptions occur or OPEC opts for further production cuts. Goldman Sachs’ base scenario assumes no additional cuts by OPEC, viewing the production increases in 2025 as a strategic move, and believes that current price weakness reflects a temporary supply strength rather than a decline in demand.
The bank expects prices to continue to fall throughout the year, with Brent crude and West Texas Intermediate reaching their lowest points near $54 and $50 per barrel in Q4 of 2026, coinciding with accelerated accumulation of commercial inventories in OECD countries. It also noted that land inventories are becoming more influential on price movements, as the pace of floating storage has slowed after reaching high levels.
The strength of supply remains the key pressure factor on forecasts, with analysts pointing to continued production exceeding expectations in the U.S. and Russia, along with a slight rise in Venezuela’s output, which is putting downward pressure on long-term prices and reinforcing the bearish trend across the futures curve. As a result, Goldman Sachs has lowered its fair value estimate for Brent crude over the medium term by $5 to $64 per barrel, and has similarly reduced its 2027 price forecast, now expecting an average of $58 for Brent and $54 for West Texas.
While geopolitical risks remain, the bank believes they will contribute to increased price volatility rather than supporting a sustained upward trend, pointing out that policymakers’ preference for relatively low energy prices will limit any strong increases, especially with political considerations surrounding the upcoming U.S. elections. Overall, Goldman Sachs considers the risks around the forecast to be balanced, but slightly skewed to the downside.
Looking further ahead, the bank expects oil prices to begin recovering from 2027 as supply growth outside of OPEC slows and global demand remains strong, but it has lowered its long-term outlook, forecasting average prices for Brent and West Texas between 2030 and 2035 to be around $75 and $71 per barrel, respectively, emphasizing that gradual price recovery is necessary to support energy sector investments after years of weak long-term spending.
Stay informed about global markets through our previous analyses. and Now, you can also benefit from LDN company services via the LDN Global Markets trading platform.
