Oil prices could average $130 a barrel next year, according to Goldman Sachs

By Nora Redmond

Goldman Sachs's base case calls for Brent crude to average $88 a barrel in 2027. But it also can foresee a scenario in which it averages $40-plus more than that.

Oil prices could average $130 a barrel next year if output from the Middle East continues to face disruptions, according to Goldman Sachs.

Analysts at the investment bank, led by Daan Struyven, head of oil research, wrote in a Sunday note that although supply from the region is currently recovering, there is a high risk of reductions.

They said that the global benchmark (BRN00) (BRNF27) could reach $140 a barrel in 2027 and average $130 throughout the year if output remains 3.5 million barrels a day below its average in 2025. The most likely catalysts for this scenario to play out are increasing shipping attacks, sustained damage to oil refineries and a consistent risk premium.

However, Goldman's base case is for Brent crude to average $88 a barrel next year, up from a previous forecast of $80, on the assumption that supply rises to 1.1 million barrels a day above the average last year.

Brent crude has jumped by almost 80% since the start of the year, currently hovering at about $108 a barrel, after the U.S. and Israel first started strikes on Iran at the end of February. It now appears as if intense fighting may resume, with the White House reportedly considering a military campaign after the U.S.'s midterm elections on Tuesday. Iran warned on Sunday that any new military confrontation with the U.S. and Israel could last longer than the previous one.

A team of mediators met over the weekend in Qatar to discuss bringing the war to a close, and they are now waiting for Washington's response to Tehran's proposal to reopen the Strait of Hormuz if the Trump administration agrees to a set of economic and military conditions.

The war in Iran has emerged as a key issue for voters in the U.S. ahead of going to the polls, with the resulting energy shock driving up prices domestically and fueling frustrations over involvement in foreign politics.

"The Mideast and Russia-Ukraine conflicts, alongside broader geopolitical fragmentation, create high disruption risk," Struyven's team wrote. "With the timing and location of disruptions nearly impossible to predict."

In the bank's downside price scenario, Brent crude could decline into the $60s in 2027 if average output from the Persian Gulf rises to 2.5 million barrels a day above the 2025 figure. The most likely trigger in this case would be a quicker-than-expected recovery in exports from the Middle East, the analysts said.

For Deutsche Bank, while oil prices (CL00) have continued to climb, expectations for higher inflation in the near-term have, too, yet markets have at the same time priced out the chance of interest-rate hikes, while long-term inflation expectations have largely stayed the same.

"Ultimately, the risk is that investors are underestimating the persistence of inflation and second-round effects," Henry Allen, macroeconomic strategist at the German investment bank, wrote in a Monday note, adding that history shows the consequences following an initial shock can take multiple months to materialize.

"But energy shocks can be prone to second-round effects given that energy is consumed across the economy, and if the shock persists, the risks grow that firms in other sectors pass that on in higher prices," he said.

For Allen, the lack of expectations for what might come after the current period of heightened inflation probably stems from projections of central-bank interest-rate increases. But he noted that monetary policy is now increasingly believed to be loosened.

He also said it could reflect a belief that high oil prices will curtail demand, eventually leading to lower prices again. Allen, though, added that longer-dated oil futures have also advanced.

-Nora Redmond

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