"Geopolitical premium" in the oil market won't last long? Goldman Sachs: With an oversupply, Brent crude will fall back to $80 by 2027.

```

Rapid changes in geopolitical situation combined with structural pressures on the demand side are reshaping the medium-term pricing logic of the crude oil market.

Goldman Sachs Co-Head of Commodity Research Daan Struyven recently released a report, lowering the forecast for the average Brent crude oil price in 2027 by $5 to $80 per barrel, citing increased supply expectations and continued weak demand as dual pressures. Meanwhile, he maintains his forecast of approximately $90 per barrel for Brent crude oil in the fourth quarter of 2026.

On the geopolitical front, according to Xinhua citing Bloomberg, the U.S. and Iran are "close" to signing an agreement around the G7 Summit next week, with the ceremony most likely in Geneva, Switzerland, and possibly as soon as Sunday. Influenced by this news, crude oil prices dropped sharply, WTI crude slid to $84 per barrel, and Brent crude traded near $87 per barrel.

Supply Upgraded, Demand Weakens, Goldman Sachs Lowers Oil Price Forecast

Goldman Sachs lowered its forecast for the average Brent crude oil price in 2027 from $85 to $80 per barrel, with the core logic coming from simultaneous changes on both supply and demand sides.

On the supply side, Goldman Sachs raised its production forecasts for the UAE (based on expectations of its exit from OPEC) and the Americas (including the US, Brazil, Guyana, and Venezuela), based on upward adjustments in its "key project database" for realized and expected supply.

On the demand side, analyst Daan Struyven pointed out, although demand is expected to rebound sharply after reopening, about 10% or more of demand weakness may persist, mainly due to the accelerated pace of energy transition and the widespread adoption of electric vehicles. This structural loss in demand is a key factor in lowering the forecast.

Actual Impact Less Than Expected, Buffering Factors Effective

Despite ongoing disruptions in the Strait of Hormuz, the actual market impact is significantly less than originally feared.

Goldman Sachs analyst Daan Struyven estimates that in the second quarter of this year, the crude oil market had a daily shortage of about 5 to 6 million barrels, far below the theoretical impact level of 14 to 15 million barrels per day due to the blockage of the Strait of Hormuz.

He pointed out this gap is mainly filled by two major buffering factors: first, demand loss close to 5 million barrels per day; second, pre-war market had over 4 million barrels per day of supply surplus. Together, these amount to about 9 million barrels per day, basically explaining the difference between actual shortage and theoretical impact.

Regarding the export recovery timeline, Goldman Sachs has postponed its expectation for normalization of Gulf oil exports from the end of June to the end of August, and believes that with current bypass transportation arrangements, restoring flow through the Strait of Hormuz to 70% of pre-war levels will achieve this goal.

The U.S. Energy Information Administration (EIA) also confirmed this assessment in its short-term energy outlook report released Tuesday, noting that continued blockade of the Strait of Hormuz is depleting global inventories and supporting oil prices.

Risk Disclosure and DisclaimerThe market involves risks, and investment should be cautious. This article does not constitute personal investment advice, nor does it consider any individual user's unique investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their specific circumstances. Investments made according to this article are at their own risk. ```