Goldman Sachs has revised down its estimate for oil prices next year, basing the revision on expectations of stronger supply and weaker demand. The bank sees Brent crude averaging $80 per barrel in 2027, thanks to a ramp-up in production across major non-OPEC producers and China’s diversification away from oil.
“We assume that just over 10% of the demand weakness persists as China’s shift to alternatives (e.g., EVs) accelerates,” the bank’s analysts said in a note, as quoted by Reuters. “We now assume that oil exports from Gulf producers normalize by late August (vs. by late June prior), which may be achieved with a rise in Hormuz flows to 70% of pre-war levels given current redirections,” the analysts also said.
Earlier this week, reports suggested that China’s demand for crude oil is on a steady decline, with data showing a dip in fuel sales from the country’s largest refiner, Sinopec. The decline may well be attributable to the crisis in the Middle East that pushed prices higher, but some—including Goldman’s analysts—are hypothesizing it is a trend. Goldman Sachs estimated that consumption of gasoline and related products in China may have fallen by as much as 20% on the year in April. Meanwhile, other forms of transport, including EVs and railways, are on the rise.
Goldman, however, allowed for a worst-case scenario for oil prices, with an extended Strait of Hormuz disruption keeping Brent crude expensive, averaging over $110 per barrel towards the end of this year if the strait reopens later than August. If it remains closed until the end of 2026, Brent crude could begin 2027 at $140 per barrel, the analysts said.
If, on the other hand, it reopens sooner, the international benchmark could drop to $70 by the end of this year and further to $60 per barrel in 2027, with supply from the United States, Guyana, the UAE, Brazil, and Venezuela contributing to a well-supplied market.
By Irina Slav for Oilprice.com
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