The global oil market could move from a supply crunch towards a surplus by the end of 2026, paving the way for lower crude prices next year, Goldman Sachs Research has said.The firm expects Brent crude to average $80 per barrel in 2027, provided supplies from the Middle East continue to recover and demand gradually improves.The forecast comes even as oil prices remain under pressure from the risk of further escalation in the US-Israel-Iran conflict. Goldman Sachs warned that renewed hostilities could prolong supply disruptions and delay the expected moderation in prices.Daan Struyven, co-head of global commodities research and head of oil research at Goldman Sachs, said the firm now expects Brent crude to reach $90 per barrel in December 2026. This is higher than its earlier projection of $85 per barrel. For 2027, however, the bank expects prices to average $80 per barrel.The changing outlook follows a sharp reduction in the gap between global oil demand and supply. In March, demand outstripped supply by 7.2 million barrels per day (mb/d). By September, the shortfall had narrowed to just 0.3 mb/d.Goldman Sachs attributed the improvement to three factors: the recovery in Middle Eastern oil exports, increased production outside the Persian Gulf and weaker consumption. Based on these trends, the bank expects supply to exceed demand in the fourth quarter of 2026, with the surplus continuing into 2027.
Middle East exports recover, but risks remain
Oil shipments from the Persian Gulf have shown signs of recovery despite the conflict. Goldman Sachs estimated that exports from the region had returned to around their 2025 average by late September, as exporters adapted to the situation and expanded transportation capacity.However, the improvement in supply has not eliminated concerns about further disruptions. Physical Brent prices for near-term delivery have risen above $130 per barrel, while benchmark Brent futures have recently traded above $100.“Physical prices remain elevated because escalation threatens supply while near-record-low global inventories fuel strong restocking demand,” Struyven said, as cited by ANI.Goldman Sachs estimates that the possibility of further disruptions is adding nearly $25 per barrel to crude prices in the form of a risk premium. The premium also reflects the prospect of additional inventory drawdowns if the conflict intensifies.
Weak consumption weighs on the outlook
Demand has also played a significant role in easing pressure on the global oil market. Consumption in the third quarter of 2026 was 3.3 mb/d lower than in the corresponding period a year earlier. China, the Middle East and developed Asian economies accounted for much of the weakness.The bank expects consumption to recover gradually as refined oil products become more available and affordable. Nevertheless, it does not expect demand to return fully to the level it might have reached in the absence of the conflict-related shock.In the fourth quarter of 2027, global oil demand is projected to remain 0.7 mb/d below that hypothetical trajectory. Goldman Sachs attributed part of the gap to faster adoption of electric vehicles and changes in fuel consumption patterns in China.The outlook for oil prices will therefore hinge on how quickly production and exports recover, how demand normalises and whether the conflict in the Middle East escalates again. While the anticipated supply surplus supports the bank’s forecast of lower prices in 2027, renewed disruptions could keep crude elevated for longer than expected.
