Synopsis:

Goldman Sachs forecasts Brent crude to average $76/bbl in 2025, maintaining a balanced price range between $70-$85 due to limited price elasticity from OPEC and shale supply. While short-term risks could push prices higher, medium-term risks favor downside due to surplus and high spare capacity.

Key Points:

• 2024 Deficit and 2025 Surplus Expectations:

  • Brent oil prices have declined to the low-to-mid $70s despite a deficit in 2024, reflecting confidence in a 2025 surplus depressing positioning and valuation.
  • Goldman projects a 0.4mb/d surplus in 2025, driven by supply growth from the Americas and increased OPEC production, outpacing resilient demand.

• Price Range and Forecasts:

  • Brent is expected to trade between $70-$85, with $76/bbl as the average for 2025.
  • By 2026, Brent is forecasted to decline to $71/bbl, reflecting a larger 0.9mb/d surplus.

• Short- and Medium-Term Risks:

  • Short-Term Upside Risks:
    • Brent could rise to the mid-$80s in H1 2025 if tighter sanctions reduce Iranian oil supply by 1mb/d.
  • Medium-Term Downside Risks:
    • High OPEC spare capacity and potential increases in production could push Brent prices to the low $60s by 2026.
    • A hypothetical 10% tariff across-the-board scenario could also result in lower prices.

Conclusion:

Goldman Sachs sees Brent crude prices stabilizing in the $70-$85 range in 2025, supported by supply-demand dynamics. However, risks skew towards lower prices in the medium term due to OPEC’s high spare capacity and potential supply growth, which could depress prices further into 2026.