Goldman Sachs’ latest research and judgment! Oil prices may top $120
International oil prices rebounded rapidly! Recently, Brent crude oil has been rising from lows, once approaching the $100 mark, with a weekly increase of more than 12%. There has been a correction in crude oil prices today, but the overall performance is still relatively strong. In terms of news, shipping risks in the Red Sea resurfaced in late July, with Houthi armed forces attacking oil tankers transiting the border one after another, and factors such as the fulfillment of production cuts by oil-producing countries in the Middle East, rapidly pushing up international oil prices. Goldman Sachs, an international investment bank, has recently issued a number of in-depth reports on commodities, breaking down geopolitical premiums. Goldman Sachs believes that the upward risks to oil prices are significantly greater than the downside, and short-term summer inventory depletion supports high.
International oil prices rebounded rapidly! Recently, Brent crude oil has been rising from lows, once approaching the $100 mark, with a weekly increase of more than 12%. There has been a correction in crude oil prices today, but the overall performance is still relatively strong. In terms of news, shipping risks in the Red Sea resurfaced in late July, with Houthi armed forces attacking oil tankers transiting the border one after another, and factors such as the fulfillment of production cuts by oil-producing countries in the Middle East, rapidly pushing up international oil prices. Goldman Sachs, an international investment bank, has recently issued a number of in-depth reports on commodities, breaking down geopolitical premiums. Goldman Sachs believes that the upward risks to oil prices are significantly greater than the downside, and short-term summer inventory depletion supports high operations. Goldman Sachs said that under the baseline neutral scenario: normal navigation of the Strait of Hormuz in 2027, the annual average price of Brent crude oil will be US$75 and WTI US$70. In the extreme upside scenario: If shipping disruptions continue until 2027, Brent crude oil is expected to exceed US$120 in the fourth quarter of 2026, and the average price will stabilize at US$100 in 2027. In the downside bottom-line scenario: If global supply increases more than expected and energy demand continues to shrink, Brent will drop to the $60 range by the end of 2027, but the probability of this scenario occurring is low. Goldman Sachs: Oil prices could break $120 in extreme scenario The core contradiction in the current crude oil market is that the three key shipping routes around the world are under simultaneous pressure, which is also the core driving force for this round of rebound in oil prices. Goldman Sachs statistics show that the average daily crude oil circulation in the Bab el-Mandeb Strait in the past 30 days has been close to 9 million barrels, of which about 4 million barrels of shipping capacity lack alternative bypass plans. Once Hormuz, the Bab el-Mandeb Strait, and the Suez Canal are blocked simultaneously, there will be a hard gap in global crude oil circulation. Although the loading capacity of Saudi Arabia's Red Sea Yanbu port has stabilized at a high of 5 million barrels per day in the past seven days, becoming the core alternative export after the Persian Gulf was blocked, the Houthi armed blockade threatens to directly erase the safety cushion of this buffer channel. In addition to the risks in the Red Sea, the escalation of the conflict between Russia and Ukraine has dragged down the Caspian Sea oil pipeline exports. The scale of Kazakhstan's crude oil exports has declined. Coupled with the implementation of production reduction plans by many countries in the Middle East, crude oil production in the Middle East has clearly declined in July, and expectations for tightening on the supply side continue to ferment. Goldman Sachs analyzed three types of oil price forecast scenarios: First, the baseline neutral scenario: assuming that the geopolitical situation in the Middle East eases in the fourth quarter, shipping gradually recovers, and Brent remains unchanged at US$80 and WTI at US$76 in the fourth quarter of 2026; under the premise that navigation in the Strait of Hormuz is normal in 2027, the annual average price of Brent is US$75 and WTI is US$70. The agency estimates that the global crude oil supply and demand excess will reach 3.2 million barrels per day in 2027, and long-term excess will suppress the price center. The second is an extreme upward scenario: If shipping disruptions in the Strait of Hormuz continue until 2027, Gulf crude oil production capacity will not be fully restored until the end of 2027. Brent is expected to exceed US$120 in the fourth quarter of 2026, and the average price will stabilize at US$100 in 2027; if the Bab el-Mandeb Strait and the Suez Canal are simultaneously blocked for a long time, oil prices will rise by an additional US$25/barrel. The third is the downside bottom-line scenario: If global supply increases more than expected and energy demand continues to shrink, Brent will dip to the lowest range of $60 by the end of 2027, but the probability of this scenario occurring is low. Even without considering the extreme geo-blockade, Goldman Sachs predicts that oil prices will maintain this round of gains from July to August. In the third quarter, global crude oil will have a supply and demand gap of 2.1 million barrels per day, and inventories will continue to be reduced. Currently, global explicit crude oil inventories have dropped to a low this year, with a total of 409 million barrels destocked since March. The inventory buffer has become thinner, and the market's sensitivity to supply disturbances has increased significantly. Any shipping disruptions can easily amplify oil price fluctuations quickly. Hedging against energy supply shocks In the current round of energy crisis in the Middle East, China has significantly cut fossil fuel imports, objectively absorbing global oversupply and easing upward pressure on oil prices. A special report by Goldman Sachs explains why the domestic economy is only under moderate pressure and no large-scale demand problems have occurred. First, oil, gas and coal are simultaneously and proactively destocked to fill the import gap. From April to May 2026, coal stockpiles will be low, crude oil storage will be accelerated, and natural gas stocks will be used appropriately to replace imported crude oil with stocks and reduce rigid demand for overseas purchases. Data show that China's explicit crude oil inventories continued to fall from May to June, forming independent supply replenishment.
Second, the energy structure is rapidly switching, and new energy vehicles are used to offset gasoline consumption. From April to June, domestic gasoline consumption fell by about 23% year-on-year, but the charging capacity at charging piles soared by 60% year-on-year, the traffic congestion index only fell slightly, and travel demand did not shrink. At the same time, the industrial side has increased the use of coal and renewable energy. The gap caused by the decline in oil and gas consumption has been filled by coal power and green electricity, and the decline in oil and gas demand has been significantly narrowed. Third, the production capacity of high-energy-consuming industries should be actively adjusted to differentiate and hedge against impacts. The output of the crude oil, chemical fiber, and sulfuric acid industries that are highly dependent on crude oil and natural gas fell year-on-year in the second quarter; while the power-intensive industries are extremely resilient, and the coal chemical industry replaces the oil and gas chemical industry, which significantly reduces domestic crude oil demand. Goldman Sachs calculations show that China has taken the initiative to reduce high-priced overseas energy purchases, suppressing the geopolitical push to a certain extent. Without the buffer of China's demand contraction, the current upward trend in oil prices will be further amplified. Goldman Sachs said that short-term Red Sea and Hormuz shipping risks remain core variables for oil prices. Inventory depletion in the third quarter and the peak summer demand season jointly support strong oil prices. Investors need to focus on tracking the Houthi armed shipping operations and the progress of U.S.-Iran diplomatic negotiations. In the medium to long term, the global crude oil surplus pattern will be difficult to reverse in 2027. The decline in oil prices is a major trend. However, factors such as energy structure transformation, US shale costs, and global strategic oil storage will limit the downside. Oil prices show a shock pattern of "short-term geopolitical surge, medium-term gradual decline, and rigid support at the bottom."
Second, the energy structure is rapidly switching, and new energy vehicles are used to offset gasoline consumption. From April to June, domestic gasoline consumption fell by about 23% year-on-year, but the charging capacity at charging piles soared by 60% year-on-year, the traffic congestion index only fell slightly, and travel demand did not shrink. At the same time, the industrial side has increased the use of coal and renewable energy. The gap caused by the decline in oil and gas consumption has been filled by coal power and green electricity, and the decline in oil and gas demand has been significantly narrowed. Third, the production capacity of high-energy-consuming industries should be actively adjusted to differentiate and hedge against impacts. The output of the crude oil, chemical fiber, and sulfuric acid industries that are highly dependent on crude oil and natural gas fell year-on-year in the second quarter; while the power-intensive industries are extremely resilient, and the coal chemical industry replaces the oil and gas chemical industry, which significantly reduces domestic crude oil demand. Goldman Sachs calculations show that China has taken the initiative to reduce high-priced overseas energy purchases, suppressing the geopolitical push to a certain extent. Without the buffer of China's demand contraction, the current upward trend in oil prices will be further amplified. Goldman Sachs said that short-term Red Sea and Hormuz shipping risks remain core variables for oil prices. Inventory depletion in the third quarter and the peak summer demand season jointly support strong oil prices. Investors need to focus on tracking the Houthi armed shipping operations and the progress of U.S.-Iran diplomatic negotiations. In the medium to long term, the global crude oil surplus pattern will be difficult to reverse in 2027. The decline in oil prices is a major trend. However, factors such as energy structure transformation, US shale costs, and global strategic oil storage will limit the downside. Oil prices show a shock pattern of "short-term geopolitical surge, medium-term gradual decline, and rigid support at the bottom."