Goldman Sachs predicts average oil prices of $76 per barrel in 2025 due to sufficient global spare capacity.
The forecast sees limited upside potential due to high spare capacity and potential trade tariffs.
Despite undisrupted Iranian oil production, Goldman Sachs warns a 2025 supply glut isn’t guaranteed, with geopolitical risks remaining a concern.
Oil prices are expected to average $76 per barrel next year amid sufficient supply and ample spare capacity, according to Goldman Sachs.
“Overall, we still see the medium-term risks to our $70-85/bbl range as two-sided but skewed moderately to the downside on net as downside price risks from high spare capacity and potentially broader trade tariffs outweigh upside price,” the investment bank’s analysts wrote in a note carried by Reuters.
Oil prices are currently close to Goldman’s call for next year. Early on Wednesday, Brent Crude prices were down by over 1% to $74.60. The U.S. benchmark price, WTI Crude, was holding onto the $70 a barrel handle, trading down 1.8% to $70.40, after the American Petroleum Institute (API) reported late on Tuesday a crude inventory build that was larger than expected.
By the end of this year, oil prices could rise due to what Goldman’s analysts described as Brent time spreads “underpricing physical tightness somewhat.”
“Despite large global spare capacity and so far undisrupted Iran oil production, we don’t think that a 2025 supply glut is a done deal,” Goldman analysts warned.
They currently see the geopolitical risk premium as limited, but cautioned that the unresolved conflict in the Middle East could inflame the war risk premium and oil prices at any time.
Two months ago, Goldman Sachs reduced its expected range for Brent by $5 to $70-$85 per barrel, citing weaker Chinese oil demand, high inventories, and rising U.S. shale production.
Higher supply from America, and possibly from OPEC+ later this year and in 2025, has led Goldman Sachs to forecast that Brent Crude prices would average below $80 per barrel next year.
Morgan Stanley has also recently revised its oil price forecasts downward, reflecting expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank now anticipates that while the crude oil market will remain tight through the third quarter, it will begin to stabilize in the fourth quarter and potentially move into a surplus by 2025.
By Tsvetana Paraskova for Oilprice.com
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