"The final wave of large-scale supply!" Goldman Sachs predicts: Oil prices will hit bottom in 2026 and begin to rebound in 2027.

"The final wave of large-scale supply!" Goldman Sachs predicts: Oil prices will hit bottom in 2026 and begin to rebound in 2027.

Is the global oil market at the beginning of a "fall first, then rise" cycle?

According to Chasewind Trading Desk, Goldman Sachs predicts in its latest long-term outlook report that "the last wave of large-scale supply flood" will lead to a massive surplus of 2 million barrels per day by 2026, causing the average Brent crude price to fall to $56 per barrel that year. This price level is not only far below the current forward contract prices but could also mark the bottom of the current cycle.

But the decline in oil prices will be short-lived. Starting from 2027, the market fundamentals will reverse. Lower oil prices will suppress supply growth from non-OPEC producers, and the prolonged sluggishness in upstream investments over the past 15 years will begin to have a significant impact. The bank predicts the market will shift to a supply shortage in the second half of 2027, driving oil prices into an upward channel and expects Brent crude prices to rebound to a long-term equilibrium level of $80 per barrel by the end of 2028.

The Last Supply Wave: Why Will Oil Prices Fall in 2026?

Goldman's short-term pessimism centers on a specific number: in 2026, the global oil market will face a massive supply surplus of 2 million barrels per day.

The report points out that this wave of supply comes mainly from two sources. First, a large number of long-cycle projects where final investment decisions (FID) were made before the pandemic. These projects were delayed due to COVID-19 and are now coming online all at once. Second, strategic output increase decisions by OPEC. Goldman assumes in its model that OPEC will continue its gradual path of removing production cuts.

The bank points out that the recent rapid increase in global visible oil inventories (up 2 million barrels per day over the past 90 days) has already confirmed that the market is in a surplus state.

Against an oversupply backdrop, a price decline becomes inevitable. Goldman predicts the average Brent crude price will be $56 per barrel in 2026 and WTI crude will be $52 per barrel, significantly below the current market forwards of about $62 and $59. The report believes oil prices may bottom out by mid-2026, at which point the market will begin to digest and look forward to future rebalancing.

Inflection Point Approaching: The Road to Recovery Begins in 2027

The downturn period in oil prices is not expected to last long. Goldman believes the market will start to feel the impact of long-term underinvestment from 2027, initiating a new round of price increases.

The report outlines several key drivers of the rebound:

  • Non-OPEC supply slowdown: Low oil prices in 2026 will hit production in non-OPEC countries, especially Russia. Meanwhile, US shale oil, after a period of rapid growth from 2012 to 2025, will see maturity in geological conditions, slowing output growth and entering a "long-term plateau."
  • Fewer new projects: The number of large new projects tracked by Goldman Sachs (GS Top Projects) will decline significantly from 2027, meaning that incremental new capacity will be hard to sustain.
  • Investment incentive demand: Due to years of capital expenditure preferring short-cycle shale and existing field expansion, long-cycle (greenfield) projects have seen severely inadequate investment, and global oil reserve life has declined. The market needs higher prices to incentivize necessary long-term investment to offset the natural decline of old fields and meet ongoing demand growth.

Based on the above analysis, Goldman expects the market to shift from surplus to shortage in the second half of 2027, pushing Brent prices to the target of $80 per barrel by the end of 2028. This price is considered necessary to balance market supply and demand by the early 2030s.

Long-Term Risks: The Dual Game of Technology and Geopolitics

Though Goldman provides a clear baseline forecast, the report also stresses significant two-way risks facing oil price paths in the future.

In the short term (2026-2027), downside risks come mainly from greater-than-expected resilience in non-OPEC supply or a global economic recession. In these scenarios, Brent price could fall to the $40 range in 2026. Upside risk is mainly if Russian supply falls faster than expected, potentially pushing Brent above $70.

Looking further ahead, technology and geopolitics are the biggest uncertainties. The report envisions a "technology supply boom" scenario—breakthroughs in AI and other technologies greatly increase supply efficiency and lower shale oil costs (to around $5 per barrel), possibly pushing oil prices below $50 by 2030. Conversely, if Russia's output continues to fall sharply to 8 million barrels per day due to sanctions and cannot recover, by 2030, Brent prices may rise to nearly $90.

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