Goldman Sachs has revised downward its oil price projection amid rising global supply and increasing economic headwinds stemming from escalating trade tensions.
The bank now expects Brent crude to trade at $71 per barrel by December 2025, representing a $5 reduction from its previous projection.
The adjustment comes as crude prices continue to face downward pressure because of higher production from OPEC+ and a weak demand outlook from key importers, particularly China.
Analysts warn that tariff disputes and geopolitical uncertainty could further dampen oil market stability with Goldman Sachs noting that risks remain skewed to the downside.
Oversupply and Trade Tensions Weigh on Oil Prices
Oil prices have retreated significantly since their peak earlier this year with Brent crude losing $10 per barrel since mid-January.
A combination of rising production and sluggish demand growth has fueled bearish sentiment and prompted major industry players to issue warnings about a potential glut in the market.
Adding to the concerns, the International Energy Agency (IEA) recently projected that global crude supply will exceed demand by 600,000 barrels per day in 2025, a surplus equivalent to 0.6% of daily global consumption.
The outlook has reinforced expectations that prices will remain under pressure, barring any significant disruption to supply chains.
Market Adjustments and Possible Recovery
Despite the downward revision, Goldman Sachs maintains a cautiously optimistic stance on potential price recovery in the coming months. The investment bank highlighted resilient U.S. economic activity and ongoing geopolitical tensions, including recent U.S. military strikes on Houthi-controlled targets in Yemen, as factors that could provide some price support.
Furthermore, the bank predicts that oil demand will rise by 900,000 barrels per day in January, though this figure represents an 18% reduction from its previous forecast. For the near term, Brent crude is expected to trade within a range of $65 to $80 per barrel, with an average price of $68 projected for 2026.
Industry Caution Amid Volatile Conditions
While Goldman Sachs expects some recovery, broader market sentiment remains cautious. OPEC and its allies continue to increase production, a strategy that could extend the supply glut if demand growth does not accelerate. Meanwhile, the U.S. Federal Reserve’s monetary policy decisions and the trajectory of global trade negotiations will play crucial roles in determining oil market trends.
With uncertainties looming, analysts emphasize that oil markets will remain highly reactive to shifts in economic and geopolitical conditions. While short-term fluctuations are expected, Goldman Sachs’ revised outlook signals that the era of sustained high oil prices may be facing renewed challenges.
