Goldman hikes oil prices forecast on high supply disruption risks

Goldman Sachs has increased its predictions for crude oil prices due to growing concerns over potential supply disruptions in the Middle East. Strategists, under the leadership of Daan Struyven, have raised their outlook for Brent crude oil prices to $105 per barrel by the end of 2026, up from $90, and West Texas Intermediate (WTI) prices to $94, up from $81. The 2027 average forecasts for Brent have risen to $88, up from $80, and for WTI to $78, up from $73.

The significant increase in the risk premium to approximately $27 per barrel is primarily responsible for the recent surge in crude prices, with spot Brent futures reaching $118. Goldman estimates that Brent's fair value has remained stable in the $90s since September and October, as global inventories have remained relatively unchanged.

However, the market is now placing greater emphasis on potential escalations following the U.S. midterm elections, with the Polymarket-implied probability of the U.S.-Iran ceasefire ending due to escalation rising from 10% before the midterms to nearly 50% by November 15 and 75% by year-end.

The $27 premium is in line with the market's expectation of a 5 million barrel-a-day decline in Middle East output lasting six months. Goldman Sachs also factors in a 1 million barrel-a-day global supply disruption allowance for 2027, taking into account the ongoing Middle East conflicts and the broader geopolitical fragmentation.

While the timing and location of any disruptions remain uncertain, Goldman's base case still anticipates a fall in prices below the current forward rates, assuming a moderation in the risk premium and continued recovery in Persian Gulf output. If Gulf output stays 3.5 million barrels per day below its 2025 average, Brent could potentially reach $140, averaging around $130 in 2027.

However, if output rises by 2.5 million barrels per day above 2025 levels and the assumed disruption does not occur, prices could fall into the $60s.