Geopolitical risks just a sideshow? Goldman Sachs issues warning again: Supply surge to continue, oil prices may bottom out in 2026.

Goldman Sachs analysts pointed out in a report released last Sunday that although geopolitical risks in Russia, Venezuela, and Iran will continue to cause oil price fluctuations, the wave of oil supply this year will lead to a market surplus, and oil prices are likely to show a downward trend. Goldman Sachs wrote in the report, "Global crude oil inventories continue to rise, and we expect a daily surplus of 2.3 million barrels in 2026. This means that unless there is a large-scale supply disruption or OPEC implements production cuts, it will be necessary to slow down the supply growth of non-OPEC oil-producing countries in 2026 by lowering oil prices while boosting demand steadily growing, in order to achieve market rebalancing." Goldman Sachs predicts that the average price of Brent crude and WTI crude this year will reach $56 and $52 per barrel respectively, and will bottom out in the fourth quarter at $54 and $50 per barrel, before gradually rising to an average of $58 and $54 per barrel in 2027 due to steady demand and a slowdown in supply growth from non-OPEC countries. Goldman Sachs analysts specifically stated, "We expect U.S. policymakers to lean towards maintaining strong energy supply before the midterm elections, which will inhibit the sustained upward momentum of oil prices." The bank also said that based on expectations for crude oil demand up to 2040, they still maintain a "long-term constructive" attitude towards crude oil. Part of the reason is that in the background of limited alternative energy supply, demand in the petrochemical, aviation, and road transport sectors will remain strong. A survey released by Goldman Sachs last week showed that against the backdrop of expectations of oversupply in the global market, 59% of over 1,100 multi-asset category clients hold a pessimistic or slightly pessimistic attitude towards crude oil, with market sentiment nearing the lowest monthly data points since January 2016. The survey conducted from January 5th to 7th also showed that a record number of institutional investors have listed crude oil as their preferred short-selling asset, further exacerbating the overall bearish sentiment. Supported by buying interest due to the tensions in Iran, oil futures saw a slight increase for the third consecutive trading day on Monday. The current Trump administration is considering how to respond to the deadliest crackdown on clerical rule since the Islamic revolution in 1979 in that country. Macro Investment Analysis in the report stated, "The possibility of disruptions in Iran's energy output poses a far greater threat to global oil supply than Venezuela. In particular, the unstable situation in Iran could also affect oil supply outside the country." Analysts believe that if there is a strike by oil workers in Iran, disruptions to the "shadow fleet" transportation, or threats of restricted shipping in the Strait of Hormuz, oil prices could rise by $15 to $20 per barrel, but such an increase is unlikely to be sustainable. As of the time of writing, WTI crude oil futures prices rose by 0.30% to $59.50 per barrel, while Brent crude oil futures prices rose by 0.34% to $64.09 per barrel.