Goldman Sachs issues multiple reports bullish on oil prices; the era of high oil prices may persist long-term

Ask AI · What’s the core logic behind Goldman Sachs’ prediction that oil prices will stay elevated for the long term?

【Huanqiu.com Finance News (Comprehensive Report)】Since March this year, the international oil price has risen by more than 30%, exerting a far-reaching impact on the global economic landscape. In recent days, Goldman Sachs, an international investment bank, has released multiple reports in succession. Based on its assessment of the risk of supply disruptions, it has further raised its oil price expectations and judged that the high-oil-price environment may remain in place for the long term.

In its reports, Goldman Sachs said that its upward revision to oil price forecasts is mainly based on two core logics: first, an assumption that the Strait of Hormuz accounts for only 5% of oil transportation volume maintained at normal levels over a period of up to 6 weeks, and that it would then take 1 month to gradually recover; second, the market has deeply recognized the risks arising from the high concentration of oil production and remaining production capacity. This recognition will drive structural increases in strategic petroleum reserves and a structural rise in forward oil prices.

At around March 25 Beijing time, after a sharp rise, international oil prices saw a pullback and traded within a narrow range of fluctuations. The front-month WTI crude oil contract was quoted at around $88 per barrel, while the front-month Brent crude oil contract was around $95 per barrel, down more than 5% from the previous day. In the domestic futures market, refined-chemical and energy products also followed with a pullback, with liquefied petroleum gas, fuel oil, ethylene glycol, and other products leading the declines. However, compared with the start of the year, the price levels of energy-and-chemical products have already risen significantly, and the cumulative gains for Brent crude oil and Shanghai crude oil futures within the year are still more than 60%. Goldman Sachs believes that during supply disruptions, the market needs to continuously increase the risk premium to induce precautionary demand contraction, thereby offsetting the risk of shortages under a long-term supply disruption scenario. It expects the Brent crude oil average price for March to April to reach $110 per barrel, up 62% versus the full-year average in 2025.

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Regarding the outlook for oil prices, Goldman Sachs believes that high oil prices will be maintained for the long term. The firm raised its 2026 oil price forecasts, expecting the full-year average for Brent crude oil to be $85 per barrel and WTI to be $79 per barrel; it also raised its forecasts for Brent and WTI in the fourth quarter of 2026 to $80 per barrel and $75 per barrel, respectively. The main driver of this upward revision comes from the expanding impact on commercial oil inventories, as well as the rise in forward oil prices after markets adjust for risk regarding effective remaining production capacity. Looking ahead to 2027, Goldman Sachs expects the full-year average prices for Brent and WTI to remain at the levels of $80 per barrel and $75 per barrel.

In terms of the impact of oil price changes on the economy, Goldman Sachs focused its analysis on the China market. Although nearly 50% of China’s oil imports are transported via the Strait of Hormuz, 60% of China’s total energy consumption comes from coal, and coal is largely produced domestically. Combined with ample oil inventories and fiscal and monetary policy controls, this reduces the economy’s sensitivity to oil prices. A sharp rise in oil and gas prices will still push up inflation. Goldman Sachs forecasts that rising oil and gas prices will help end the year-on-year decline in China’s PPI, and it has raised its full-year 2026 forecasts for both CPI and PPI inflation to 1%, above the 0.6% and -0.7% forecasts made at the beginning of the year.

For export trade, Goldman Sachs said that low-income emerging economies are the most vulnerable to shocks from high oil prices due to the lack of large-scale oil inventories and fiscal subsidies, which could lead to slower Chinese exports to these regions in the coming few quarters. From a medium-term perspective, fluctuations in energy prices will prompt oil-importing countries to strengthen energy supply security, and China’s leading advantages in key industries such as electric vehicles, batteries, and power generation equipment are expected to benefit from a global rise in related demand. (Wenxin)