Oil Prices Expected to Drop Further in 2026 Before Slow Recovery
Geopolitical Risks and Supply Surplus Shape Oil Market Outlook
Geopolitical risks are expected to continue influencing oil price fluctuations, but a surplus of supply is likely to keep futures lower this year before a potential recovery in 2027, according to analysts at Goldman Sachs. The bank suggests that U.S. policymakers’ focus on maintaining strong energy supply will help limit upward pressure on oil prices ahead of the midterm elections.
Goldman Sachs anticipates that Brent crude and West Texas Intermediate (WTI) will reach their lowest points this year at $54 per barrel and $50 per barrel, respectively, in the fourth quarter. By 2027, the bank estimates that average prices will rise slightly to $58 for Brent and $54 for WTI, driven by solid demand and slower supply growth from non-OPEC countries.
Oil Prices Slip Amid Rising Geopolitical Tensions
Despite increased supply risks due to escalating protests in Iran and uncertainties surrounding Venezuelan crude exports, oil prices have slipped. Brent crude fell 0.3% to $63.15 per barrel, while WTI dropped 0.4% to $58.86 per barrel.
ING analysts highlight that Iran, as the fourth-largest OPEC member, produces around 3.2 million barrels per day of crude oil, which poses a significant supply risk. U.S. officials have indicated that President Trump will be briefed on potential responses to the protests in Iran, including sanctions, cyber weapons, and military strikes.
Investors are also closely watching supply risks in Russia, particularly as Ukraine continues attacks on energy infrastructure in the region and the possibility of stricter U.S. sanctions looms.
Oil Prices May Trend Lower Despite Geopolitical Concerns
Three members of Goldman Sachs Commodities Research note that oil prices may trend downward this year due to strong supply, although geopolitical risks remain. They suggest that rising global oil stocks indicate that market rebalancing might require lower oil prices in 2026 unless there are significant supply disruptions or OPEC production cuts.
The analysts state that the ongoing supply wave has left the market with a 2.3 million barrels per day surplus, although geopolitical tensions are likely to continue driving price swings. Goldman Sachs forecasts Brent crude and WTI to average $56 per barrel and $52 per barrel, respectively, in 2026.
Front-month WTI crude oil futures are down 0.7% at $58.73 per barrel, while front-month Brent crude oil futures are 0.6% lower at $62.96 per barrel.
Iran Tensions Fuel Worries in the Oil Market
Tensions in Iran are raising concerns in the oil market, according to ANZ Research analysts. Over 500 people have been killed in two weeks of unrest in Iran, as reported by a rights group. Iran’s parliamentary speaker has threatened to attack American military bases in the Middle East if the U.S. acts first.
These developments put at least 1.9 million barrels per day of oil exports at risk of disruption, according to ANZ analysts. Front-month WTI crude oil futures are up 1.0% at $59.69 per barrel, while front-month Brent crude oil futures are 0.9% higher at $63.92 per barrel.
Oil Rises Amid Middle East Tensions
Oil prices rose in the early Asian session amid heightened Middle East tensions that could lead to supply disruptions. According to a report by the Wall Street Journal, citing U.S. officials, President Trump is scheduled to be briefed on specific options to respond to protests in Iran.
On Sunday, Iran’s parliamentary speaker warned of potential attacks on American military bases in the Middle East if the U.S. takes action first. Barclays’ analyst Amarpreet Singh noted that markets are more focused on the intensifying unrest in Iran, alongside resilient fundamentals.
Front-month WTI crude oil futures are up 0.7% at $59.53 per barrel, while front-month Brent crude oil futures are 0.7% higher at $63.80 per barrel.
