Commodity strategists at major Wall Street investment banks expect 2026 and 2027 to be difficult years for the oil industry. And that’s after a nearly 20% drop in oil prices this year.
According to a base case set by JPMorgan’s commodities team led by Natasha Kaneva, Brent crude oil (BZ=F), the international benchmark price, will fall to $58 per barrel in 2026, and West Texas Intermediate crude oil (CL=F), the US benchmark price, will trade $4 below this level. In 2027, the company predicts prices will fall another dollar per barrel.
“At the risk of whipping a dead horse, our message to the market has remained consistent since June 2023,” JPMorgan strategists wrote. “While demand is strong, supply is simply too abundant.”
At Goldman Sachs, the bank’s commodities desk, led by Daan Struyven, forecast a similar base case of Brent and WTI trading next year at $56 and $52, respectively.
However, Goldman sees healthier price support in the coming years, with Brent and WTI rising to $80 and $76 per barrel by 2028. This forecast assumes that oversupply will not continue to dominate the market.
“We expect oil prices to rebound in 2027 as the market rebalances and shifts focus toward incentivizing investment given the shrinking life of oil reserves, maturation of U.S. shale, and strong demand growth,” Goldman Sachs analysts wrote.
Oversupply has been, and will likely continue to be, the dominant narrative around oil this year, and this theme is expected to continue into next year. While demand has remained healthier than expected, global supply has continued to increase.
The OPEC+ cartel has withdrawn production cuts every month since April, increasing production levels across the bloc by more than 2 million barrels per day. Meanwhile, U.S. shale producers are expected to reach a record level of production in December, according to data from the Energy Information Administration.
During the first half of 2025, large storage by China, on the order of millions of barrels per day, had absorbed much of the additional supply in the market, supporting prices.
Demand from the Middle East has remained stable and Indian refiners have increased their purchases of Ural crude from Russia, according to several oil analysts who spoke to Yahoo Finance.
At the same time, there are more than one billion barrels stored in tankers at sea around the world, the highest level of accumulations in water since 2023. In its latest report, the International Energy Agency called for the widely projected supply glut by 2026 to reach a surplus of 4 million barrels per day.
The 237 meter long oil tanker “Ebn Hawkel” arrives at the seaport of Rostock from Mongstad (Norway) by tugboats. The large tank farm at the Rostock oil port has a total capacity of 700,000 cubic meters with its three tank farms. Photo: Jens Büttner/dpa (Photo by Jens Büttner/Picture Alliance via Getty Images) ·image alliance via Getty Images
Given the “extraordinary projected oversupply” in the oil market, Macquarie analysts wrote, the Australian bank is modeling a similarly bearish price outlook for 2026.
“As a baseline expectation, (current market conditions) are set to punish oversupply in the fourth quarter of 25/1/26, which we believe may require a sharp step lower in oil prices and a shift in OPEC policy,” Macquarie analysts wrote in a note to clients, with a target of $60.75 for Brent and $56.63 for WTI in 2026.
The three banks’ base cases assume that the market will be forced to react and cut production as “low prices in 2025-2026 take their toll on non-OPEC supply, and very few projects come online by the end of this decade after 15 years of low investment,” the Goldman Sachs analysts wrote.
Even state-owned producers like Saudi Aramco (2223.SR) and the United Arab Emirates’ Abu Dhabi National Oil Company in the Middle East need to turn a profit, and other geopolitical factors such as the war in Ukraine have complicated the picture.
At JPMorgan, strategists predict that without some market stabilization efforts, Brent could change hands at $30 a barrel by 2027, a level not seen since the depths of the 2020 oil crisis at the start of the COVID-19 pandemic.
Such a move would push prices near or below the break-even point of around $51 Brent and $43 WTI per barrel for U.S. oil and gas traders.
Pumpjack in Williston, Williams County, North Dakota, United States ·Feifei Cui-Paoluzzo via Getty Images
But strategists at JPMorgan and Goldman Sachs believe the oil and gas industry will be forced to act to limit supply long before prices reach these extremes.
“The magnitude suggested by market imbalances is unlikely to be fully realized in practice. Adjustments are expected on both the supply and demand sides,” JPMorgan strategists wrote.
“We expect the market to find balance through a combination of growing demand – driven by lower prices – and a combination of voluntary and involuntary production cuts.”
Jake Conley is a breaking news reporter covering US stocks for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
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