Where Are Oil Prices Headed in 2025 and Beyond? Goldman Sachs’ Bearish Outlook Meets Rising Demand

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Goldman Sachs has doubled down on its bearish oil price forecast through 2026, projecting Brent crude at $56 per barrel and West Texas Intermediate (WTI) at $52 by next year, even as global oil demand shows signs of resilience. This seemingly paradoxical stance—expecting lower prices despite rising consumption—has sparked debate in energy markets. Let’s unpack the factors driving Goldman’s outlook, the counterarguments from other analysts, and what this means for oil prices in the near future.

Goldman’s Case: Supply Overwhelm and Economic Risks

Goldman Sachs’ bearish thesis hinges on a significant increase in non-OPEC supply, excluding U.S. shale, which they project will grow by 1 million barrels per day (bpd) over the next two years. New projects in Saudi Arabia and Qatar, alongside rising natural gas liquids production, are expected to flood the market, outpacing demand growth. The bank also cites high spare capacity and recession risks, particularly tied to ongoing U.S.-China trade tensions, as key downward pressures on prices. In an extreme scenario, Goldman warns Brent could crash below $40 by late 2026 if a global slowdown coincides with a full unwind of OPEC+ production cuts.

Despite revising their demand growth forecast upward to 600,000 bpd for 2025 and 400,000 bpd for 2026, Goldman remains steadfast in its view that supply dynamics will dominate. The bank also points to U.S. shale production potentially peaking earlier and at lower levels if prices remain suppressed, which could paradoxically tighten future supply but not enough to offset near-term oversupply.

Geopolitical factors, such as a potential U.S.-Iran nuclear deal, add further complexity. Such a deal could bring Iranian oil back to the market, increasing supply and exerting additional downward pressure on prices. However, Goldman notes that a de-escalation in trade tensions could bolster global growth, potentially offsetting some bearish effects by boosting demand.

The Counterargument: Tight Inventories and Demand Resilience

Not everyone agrees with Goldman’s dour outlook. UBS, for instance, challenges the surplus narrative, pointing to tighter-than-expected global oil inventories in Q1 2025. Analyst Amena Bakr from Kpler noted on X that these inventory levels suggest a more balanced market, potentially necessitating upward revisions in both supply and demand forecasts. This view aligns with recent market movements: Brent crude was trading at $65.19 and WTI at $62.27 on May 12, 2025, buoyed by optimism over U.S.-China tariff negotiations.

Rising Asian oil imports and strong seasonal travel demand further support the bullish case. Reuters reported that oil prices climbed over $1.60 per barrel on May 13, 2025, driven by tariff exemptions and robust Chinese crude imports. JPMorgan analysts also highlighted positive signals from fuel markets, suggesting that refined product demand remains strong despite broader economic concerns.

Geopolitical Wildcards and Market Dynamics

The oil market is no stranger to volatility, and 2025 is proving no different. President Donald Trump’s trade policies, including on-again, off-again tariffs, have created uncertainty. While a 90-day tariff pause for most countries (excluding China) lifted prices in mid-April, the threat of renewed trade wars continues to loom, potentially curbing global economic growth and oil demand.

OPEC+’s recent decisions to increase production—411,000 bpd in June following a similar hike in May—have added to bearish sentiment. Goldman expects another production increase in July but suggests the alliance may pause further hikes if global economic activity slows further. Meanwhile, a possible Israeli strike on Iranian nuclear facilities could disrupt supply, potentially pushing prices higher in the short term, though excess OPEC capacity might mitigate longer-term impacts.

What Does This Mean for Oil Prices?

The tug-of-war between supply growth and demand resilience makes forecasting oil prices a tricky endeavor. Goldman’s bearish outlook assumes a supply-heavy market and economic headwinds, but the data tells a mixed story. Tighter inventories and robust demand in key regions like Asia suggest prices may find a floor above Goldman’s projections. Brent and WTI trading well above the bank’s 2026 forecasts ($65+ versus $56 and $52, respectively) indicate markets are not fully buying the bearish narrative.

However, risks remain. A prolonged trade war or a full OPEC+ production unwind could push prices toward Goldman’s worst-case scenario. Conversely, a resolution to tariff disputes or unexpected supply disruptions could drive prices closer to UBS’s more optimistic $68 Brent forecast.

The Crude Truth

For investors and industry players, the outlook is one of cautious navigation. While Goldman Sachs sees a supply-driven price decline, rising demand and tight inventories suggest the market may not be as oversupplied as feared. Keep an eye on OPEC+ decisions, U.S.-China trade developments, and geopolitical flashpoints like Iran. The Crude Truth? Oil prices are likely to remain volatile, caught between structural supply growth and resilient demand.

One key point I have mentioned in earlier articles is that global demand has remained high, and India is on track to increase imports again due to demand. As India and China's economies grow, that will determine global demand numbers.

If President Trump does have to place secondary sanctions on Russia, all bets are off, and the price could spike back to $90 to $100. I do not expect that, but geopolitical risks are currently high.

Oil and gas operators recognize that the economics of their wells are essential, but they have become critical in avoiding mistakes in tight markets. I am pleased that we are on track for our drilling programs and payouts to our investors. We have a great team examining all aspects of the drilling equation before we drill a well.

Betting on a single outcome—bearish or bullish—may be riskier than staying nimble in this complex market. And That is the Crude Truth

Disclaimer: This article is for informational purposes only and not financial advice. Always conduct your own research before making investment decisions.

Sources: OilPrice.com, Reuters, Bloomberg, Business Insider, X posts