Will Oil Prices Decline as Middle East Supply Recovers?

Goldman Sachs Research expects oil prices to moderate as Middle Eastern supply recovers, but renewed conflict escalation could keep prices elevated for longer.

• Brent is forecast at $90 a barrel in December 2026, up from the previous $85 forecast, and at an average of $80 in 2027.
• Persian Gulf exports have returned to around their 2025 average since late September, including an estimated 4 mb/d of “dark” shipments, while the spot price contains an estimated nearly $25 geopolitical risk premium.
• The global oil market’s deficit narrowed from 7.2 mb/d in March to 0.3 mb/d in September 2026, with higher non-Gulf production and weaker demand expected to create a surplus in Q4 2026 and 2027.
• Global oil demand fell by roughly 1.3 mb/d in September versus the 2025 average and by 3.3 mb/d year over year in Q3 2026, with weakness concentrated in China, the Middle East, and OECD Asia.
• The team estimates Q3 demand was nearly 4 mb/d below its no-shock path and expects 80% of that gap to unwind by Q4 2027, although a residual 0.7 mb/d shortfall will remain as electric-vehicle adoption and other behavioral changes persist.

Takeaway: The base case favors lower oil prices as supply adapts and demand recovers, but investors should retain significant upside-risk exposure because attacks on regional infrastructure, low inventories, and portfolio hedging demand could delay the decline.