Goldman Sachs Slightly Raises Oil Price Forecast, Expects "Middle East Shipping Disruption to Last Until 2027," but "Price Increase Will Be Limited"

Goldman Sachs has raised its Brent and WTI crude oil price forecasts by $5 each, citing expected interruptions in Middle Eastern shipping extending through 2027. However, due to the market’s stronger-than-anticipated adaptability and continued recovery in Middle Eastern supply, the magnitude of this upward adjustment remains relatively restrained.

According to Chasing Wind Trading Desk, in its latest research report released on September 7, Goldman Sachs raised its December 2026 Brent/WTI price forecasts to $85/$80 per barrel, and its full-year 2027 forecasts to $80/$75 per barrel. The report points out that both the oil market and shipping segments are increasingly pricing in a protracted Middle East conflict: Brent spot futures have risen to $97, and the implied probability in the market of Brent breaking above $100 in March 2027 has jumped from about 6% a month ago to approximately 25% now.

Despite extending its assumptions on the duration of shipping disruptions, the upward revision in price forecasts remains limited. The core reasons are: OECD commercial inventories have shown little apparent decline since the outbreak of the war, and the global market deficit has narrowed significantly—from around 7 million barrels per day in March 2026 to roughly 1 million barrels per day in Q3 2026, showcasing much greater market resilience than expected.

Limited Price Upside: Two Key Buffers

Goldman Sachs attributes the restricted price forecast increase to two core reasons.

First, OECD commercial inventory resilience is much stronger than expected. OECD onshore commercial inventories—a key leading indicator for crude oil prices—have seen almost no significant drawdown since the war began. As of the end of August, Goldman Sachs tracked OECD commercial inventories at 1.19 billion barrels above their July supply-demand balance estimate. Since the war started, visible global inventories have dropped by 543 million barrels, but only about 26 million barrels of this decline came from OECD commercial storage; nearly 200 million barrels were from OECD Strategic Petroleum Reserves (SPR) and floating crude, with another 80 million barrels from China. This heavy concentration of inventory drawdown in non-commercial categories means the direct boost to Brent spot prices in the short term is relatively limited.

Second, the recovery in Middle Eastern supply adaptability continues to progress. Goldman Sachs expects that as "dark flows" further expand, new pipeline capacity comes online towards the end of 2027, and the United Arab Emirates and Saudi Arabia gradually bring some idle capacity online, Middle Eastern supply will continue to recover. Persian Gulf LPG production has rebounded from its low in April (14.3 million barrels per day below February 2026 levels) to being only 8 million barrels per day lower in July. Goldman Sachs estimates an additional effective capacity of 38,000 barrels per day bypassing the Strait of Hormuz will be added by the end of 2027, mainly through the expansion of the UAE’s East-West pipeline (+1.8 million barrels per day) and the expansion of Saudi Arabia’s Yanbu port (+2 million barrels per day).

Low Inventories Do Not Necessarily Mean Oil Prices Will Soar

Despite global visible inventories and OECD SPR sitting at historic lows, Goldman Sachs believes this does not necessarily mean crude oil prices will immediately spike sharply, citing three reasons.

Historical experience: The historical correlation between visible inventories and oil prices is weak. For example, when visible global inventories reached a historic low in November 2024 (based on data from 2017 onwards), Brent was only $76. Measured in days of demand, OECD commercial inventories—a much stronger predictor—are currently still 16% higher than their 2003 average, which marked the historical low for this metric.

Inventories are not depleted: Goldman Sachs estimates global onshore oil inventories have fallen to 8.69 billion barrels from 9.1 billion barrels before the war, but this is still far above the estimated minimum operating inventory of 4.2 billion barrels, with no short-term supply disruption risk.

Price sensitivity of Chinese imports: China’s net crude imports are still down about 30% year-on-year. This price sensitivity will limit price surges during upward movements and provide support during declines. Goldman Sachs estimates that if China keeps imports stable between March and August 2026, Brent’s fair value would be $10–15 higher. The price sensitivity of Chinese crude demand is likely to persist, mainly because massive investments in electric vehicles, electric trucks, and coal-based petrochemical facilities have significantly boosted China’s ability to decouple its economy from oil.

Overall Price Risks Tilt Upwards

Goldman Sachs explicitly points out that the risks to its price forecasts are substantially skewed to the upside, especially in the near term.

In the upside scenario, if Persian Gulf average output in 2027 is 4 million barrels per day below pre-war levels (compared to a 500,000 barrels per day baseline scenario), Brent could break through $120 per barrel. Goldman Sachs believes further escalation of shipping attacks in the Strait of Hormuz or the Red Sea is the most likely trigger for such a scenario.

In the downside scenario, if Persian Gulf average output in 2027 is 1 million barrels per day above pre-war levels, Brent could fall into the $60 range.

As for trading strategy, Goldman Sachs continues to recommend hedging geopolitical risks by maintaining a long position on the March to December 2027 Europe diesel forward spread. Should Russian or Middle Eastern refinery outages persist, this spread could surge more than 100% from current levels.