d OECD commercial oil inventories have “barely drawn since the war began,” reflecting a smaller-than-expected supply deficit and the concentration of inventory declines in strategic reserves, oil stored on water and China.
Goldman also assumes that Middle East oil supplies will continue to adapt, with production gradually recovering during the second half of 2027 as pipelines become operational.
The strategists said low visible global oil inventories and low OECD strategic reserve levels do not necessarily indicate an imminent increase in prices. When visible global inventories reached an all-time low in November 2024, Brent was trading at $76 per barrel.
Goldman estimated that global landed oil inventories have declined to 8.6 billion barrels from 9.1 billion barrels before the war, but remain above estimates for minimum operational storage.
The bank also expects price-sensitive Chinese crude imports, which are about 30% lower year over year, to limit potential price increases.
Goldman Outlines Brent Upside and Downside Scenarios
Goldman said risks to its forecasts remain “significantly tilted to the upside on net, especially near-term.”
Under the bank’s upside scenario, Brent could exceed $120 per barrel if average Gulf oil production in 2027 remains 4 million barrels per day below pre-war levels. Goldman’s base case assumes Gulf production will average 0.5 million barrels per day below pre-war levels.
The strategists identified intensified shipping attacks in the Strait of Hormuz and Red Sea as the most likely trigger for the upside scenario.
Under Goldman’s downside scenario, Brent could fall into the $60s during 2027 if average Gulf production rises to 1 million barrels per day above pre-war levels.
Goldman said it continues to recommend hedging geopolitical risk through deferred March 2027 to December 2027 European diesel timespreads. According to the bank, those spreads would increase by more than 100% if persistent Russian or Middle Eastern refinery outages keep the nearby nine-month spread around current levels.
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d OECD commercial oil inventories have “barely drawn since the war began,” reflecting a smaller-than-expected supply deficit and the concentration of inventory declines in strategic reserves, oil stored on water and China.
Goldman also assumes that Middle East oil supplies will continue to adapt...
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