Higher Targets on Tighter OECD Inventories

Goldman Sachs has raised its fourth-quarter 2026 oil price forecasts, citing lower-than-expected OECD inventories, even as it maintains that the global crude market will remain in surplus next year. The bank now expects Brent crude to average $60 per barrel and West Texas Intermediate (WTI) $56 in the final quarter of 2026, marking a $6 upward revision to prior estimates.

For full-year 2026, Goldman lifted its average projections to $64 for Brent and $60 for WTI, up from previous forecasts of $56 and $52 respectively. The revision reflects a tightening in developed-market stockpiles, which have not built as quickly as anticipated despite expectations of excess supply.

Notably, the bank continues to assume no major supply disruptions tied to Iran and no Russia-Ukraine peace deal that would meaningfully alter flows. Instead, the upgrade is grounded in physical inventory dynamics — a reminder that stock levels often drive near-term pricing more directly than headline supply projections.

Surplus Outlook Remains Intact

Despite the higher price targets, Goldman maintained its 2026 surplus estimate of approximately 2.3 million barrels per day. The bank slightly downgraded both supply and demand growth by about 200,000 barrels per day due to softer Asian economic momentum.

On the supply side, production forecasts were lowered for Kazakhstan, Venezuela, Iran and Iraq following output disappointments. However, these downgrades were offset by stronger expectations for output growth in the Americas and from core OPEC producers with spare capacity.

Goldman also expects OPEC+ to begin gradually increasing production in the second quarter of 2026, supported by the fact that OECD inventories have not accumulated meaningfully. In effect, the organization may see room to add barrels without immediately overwhelming the market.

Still, downside risks remain prominent. The bank flagged potential price declines of $5 for Brent and $8 for WTI in late 2026 if sanctions relief for Iran or Russia accelerates supply and leads to a faster build in global inventories.

Geopolitics and Market Psychology

Oil prices recently dipped about 1% as the United States and Iran prepared for another round of nuclear talks, easing fears of near-term escalation. Brent was trading near $71 per barrel, while WTI hovered around $65.75, levels well above Goldman’s long-term forecast assumptions.

Goldman’s $60 Brent target incorporates an assumption that the current geopolitical risk premium — estimated at roughly $6 — will gradually fade. The bank also anticipates a modest $5 decline in fair value tied to rising inventories over time.

Looking further ahead, Goldman expects Brent and WTI to average $65 and $61 respectively in 2027, with prices potentially climbing to $70 and $66 by December 2027 on the back of solid demand and moderating supply growth.

For investors, the message is nuanced. While structural oversupply remains part of the baseline narrative, inventory tightness can delay price weakness and even create upside in the interim. In a market shaped by shifting geopolitical risks and OPEC+ production decisions, inventory trends may continue to outweigh headline surplus forecasts.