Goldman keeps Brent oil forecast, but flags downside risks to demand

Goldman Sachs reiterated its Brent oil price forecast of $64/bbl for Q4 2025 and $56/bbl for 2026, but flagged increasing risks. The firm sees upside potential from pressure on sanctioned Russian and Iranian supply, yet significant downside risks to demand growth due to escalating U.S. tariffs and weakening U.S. economic data, which elevates recession probabilities. While OPEC+ agreed to raise September output, Goldman anticipates stable quotas post-September as demand moderates, and despite India's recent halt in Russian oil purchases, the bank still expects limited overall disruption to Russian supply.

Analysis

Goldman Sachs maintains its Brent oil price forecast, projecting an average of $64 per barrel in Q4 2025 and $56 in 2026, but highlights a growing range of countervailing risks to this baseline. The analysis presents a balanced but cautious outlook, with the overall sentiment leaning negative due to significant demand-side concerns. Upside price risk stems from mounting pressure on sanctioned oil supplies from Russia and Iran, compounded by a faster-than-expected normalization of spare capacity. However, these factors are significantly offset by downside risks to demand. Goldman flags its 800,000 barrels per day average annual demand growth forecast for 2025-2026 as vulnerable due to increased U.S. tariffs and recent weak U.S. economic activity, which suggest the economy is growing at a below-potential pace and elevates the probability of a recession within the next year. On the supply side, while OPEC+ has agreed to a 547,000 bpd output increase for September, Goldman anticipates the group will hold production quotas unchanged thereafter as OECD commercial stocks are expected to build and seasonal demand fades. The bank also views the risk of major disruptions to Russian supply as limited, despite Indian refiners recently halting purchases, citing the potential for deeper price discounts and sustained demand from key buyers to maintain export volumes.

Key Decisions for Investors

• Investors should prepare for heightened price volatility as significant demand destruction risks, driven by potential U.S. recession and trade tariffs, are directly counteracting potential supply constraints from sanctions.
• It is prudent to closely monitor leading U.S. economic indicators and any escalation in tariff policies, as these are identified as the primary catalysts that could push oil prices below Goldman's baseline forecast.
• While Goldman downplays the risk, any actual, sustained disruption to Russian oil exports represents a key source of upside volatility, making the purchasing behavior of major importers a critical data point to watch.
• Anticipate that OPEC+ policy will remain reactive, and be prepared for the group to hold or even cut production post-September should the forecasted demand weakness and inventory builds materialize.