Goldman Sachs raises H2 Brent oil forecast, citing risk of supply disruption

• Goldman Sachs has raised its crude oil price forecasts for H2 2025, anticipating Brent crude to reach $66 per barrel and WTI crude $63 per barrel due to supply challenges and diminishing oil stockpiles in OECD nations.

• The bank expects OPEC+ to gradually reduce production cuts starting in September, which could further influence market prices, alongside a projected surplus of 1.7 million barrels per day in 2026.

• Despite these long-term bullish projections, short-term market movements have been bearish due to uncertainty created by Trump's recent proposals regarding Russia and tariffs, which tempered immediate concerns about supply disruptions.

• In related market actions, Nymex crude prices experienced declines, while natural gas prices rose substantially due to anticipated hotter weather and increased LNG export activity.

Recommendation Rating: Bullish Outlook on Oil Prices

Goldman Sachs has recently revised its crude oil price projections for the second half of this year, highlighting the industry's shift away from recession fears towards potential supply challenges, diminishing oil stockpiles in OECD nations, a rapid reduction in perceived spare production capacity, and worries over Russian output limitations.

The investment bank has elevated its Brent crude forecast for H2 2025 by $5 per barrel to $66, while also increasing its forecast for WTI crude by $6 to $63, up from a previous estimate of $57. For the year 2026, Goldman Sachs maintains its expectations at $56 for Brent and $52 for WTI. This reflects a balancing act between the upward movement spurred by rising long-term prices and the impact of a broader surplus estimated at 1.7 million barrels per day, compared to an earlier projection of 1.5 million barrels per day for 2026.

Goldman Sachs also anticipates that OPEC+ will begin to roll back 2.2 million barrels per day in production cuts by September, which includes a final increase of 550,000 barrels per day.

The bank expressed confidence that diminished spare capacity will enhance the prospect of price recovery post-2026. Their optimistic long-term outlook is anchored in factors such as declining investments, a shortage of new projects outside OPEC anticipated after 2026, and increasing demand over the coming decade.

However, crude oil futures saw a decline on Monday, prompted by former President Trump’s latest strategy to press Russia for a ceasefire in Ukraine, which lacked direct measures targeting Russian oil exports. Trump announced that the U.S. would furnish Ukraine with a comprehensive weapons package and threatened to impose 100% secondary tariffs on nations engaging in trade with Russia if a ceasefire is not achieved in the next 50 days. Nevertheless, he refrained from detailing new sanctions on Russian oil shipments, disappointing traders who had anticipated a more forceful response after Trump’s prior reference to making a “major statement” regarding Russia.

The market's reaction was bearish, given that the 50-day timeline potentially minimizes the risk of immediate supply disruptions, as indicated by Phil Flynn, an analyst at Price Futures Group, who noted that concerns about prompt sanctions on Russian oil were now perceived to be further off than previously thought.

Furthermore, Trump’s warning of 30% tariffs on products from the European Union and Mexico over the weekend has also raised doubts regarding energy demand.

As a result, front-month Nymex crude for August settled down 2.1% at $66.98 per barrel, while front-month September Brent crude fell by 1.6% to close at $69.21 per barrel. In contrast, front-month Nymex natural gas for August rose significantly by 4.6% to reach $3.466 per MMBtu, spurred by forecasts of hotter weather in the U.S. and increasing activity at LNG export terminals.

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