Goldman Sachs raised its Brent and WTI crude price forecasts on Sunday, expecting shipping disruptions in the Middle East to persist into next year.

The team, led by Daan Struyven, lifted its Brent/WTI forecasts by $5 to $85/80 per barrel for December 2026 and to $80/75 for 2027. Markets, the strategists said, are increasingly pricing in a prolonged conflict: Brent spot futures have climbed to $97, while the options-implied probability of Brent topping $100 in March 2027 has jumped to about 25%, from roughly 6% a month ago.

Despite the new assumption, Goldman called its price upgrade modest, for two reasons. OECD commercial oil inventories, a key price driver, have “barely drawn since the war began,” reflecting a smaller-than-expected deficit and a concentration of stock draws in strategic reserves, on-water storage and China.

Goldman also assumes Middle East supply adaptation continues, with production gradually recovering by the second half of 2027 as pipelines come online.

The strategists said low visible global oil stocks and low OECD strategic reserve levels do not necessarily signal an imminent price spike. When visible global stocks hit their all-time low in November 2024, Brent traded at $76. Goldman also estimated that global landed oil stocks have declined from 9.1 billion barrels before the war to 8.6 billion barrels today, still well above minimum operational storage estimates.

Price-sensitive Chinese crude imports, still down about 30% year-over-year, are also expected to moderate price upside.

Goldman said risks to its forecast remain “significantly tilted to the upside on net, especially near-term.” In an upside scenario, Brent could exceed $120 per barrel if 2027 average Gulf output remains 4 million barrels per day below pre-war levels, compared with 0.5 million barrels per day below in the bank’s base case. Intensified shipping attacks in the Strait of Hormuz and the Red Sea are the most likely trigger for this scenario, the strategists noted.

In a downside scenario, Brent could decline into the $60s in 2027 if average Gulf output rises 1 million barrels per day above pre-war levels.

Goldman said it continues to recommend hedging geopolitical risk through deferred March 2027 to December 2027 European diesel timespreads, which it said would rise more than 100% if persistent Russian or Mideast refinery outages keep the nearby nine-month spread near current levels.

Source: Investing.com