Oil prices expected to fall in 2026 as Wall Street sees 'punishing oversupply' risking return to COVID levels
Commodities strategists at Wall Street’s top investment banks expect 2026 and 2027 to be tough years for the oil industry. And that’s after a nearly 20% decline in oil prices this year.
Under 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, with West Texas Intermediate crude oil (CL=F), the US benchmark, trading $4 below this level. In 2027, the firm sees prices falling by another $1 per barrel.
“At the risk of flogging a very dead horse, our message to the market has remained consistent since June 2023,” JPMorgan strategists wrote. “While demand is robust, 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 hands next year at $56 and $52, respectively.
Goldman sees healthier price support in subsequent years, however, with Brent and WTI rising to $80 and $76 per barrel by 2028. This forecast assumes oversupply doesn’t continue to dominate the market.
“We expect oil prices to pick up in 2027 as the market returns to balance and shifts focus to incentivizing investment given the reduction in oil reserve life, the maturing of US shale, and solid demand growth,” Goldman Sachs analysts wrote.
Oversupply has been, and will likely continue to be, the dominant narrative for oil through this year, and this theme is expected to continue in the year ahead. While demand has remained healthier than expected, global supply has kept climbing.
The OPEC+ cartel has unwound production cuts every month since April, increasing output levels across the bloc by more than 2 million barrels per day. Meanwhile, US shale producers are expected to reach a record-high production level in December, according to data from the Energy Information Administration.
Through the first half of 2025, heavy stockpiling by China to the tune of millions of barrels per day had absorbed much of the extra supply on the market, supporting prices.
Demand from the Middle East has held steady, and Indian refiners have increased their purchases of Urals crude from Russia, according to several oil analysts who spoke with Yahoo Finance.
At the same time, there are more than 1 billion barrels sitting in tankers at sea globally, the highest level for on-the-water buildups since 2023. In its latest report, the International Energy Agency called for the widely foreseen 2026 supply glut to reach an overhang of 4 million barrels per day.
Given the “extraordinary oversupply anticipated” in the oil market, Macquarie analysts wrote, the Australian bank is modelling a similarly bearish price outlook for 2026.
“As a base expectation, [current market conditions] sets up for punishing oversupply in Q4 ’25/Q1 ’26, which we believe may necessitate a pronounced step lower in oil prices and OPEC policy pivot,” Macquarie analysts wrote in a note to clients, targeting $60.75 for Brent and $56.63 for WTI in 2026.
The base cases from all three banks assume that the market will be forced to react and cut back on production as “low 2025-2026 prices take their toll on non-OPEC supply, and very few projects come online later this decade after 15 years of low investment,” Goldman Sachs analysts wrote.
Even state-directed producers such as Saudi Aramco (2223.SR) and the UAE’s Abu Dhabi National Oil Company in the Middle East need to turn a profit, and other geopolitical factors like the war in Ukraine have complicated the picture.
At JPMorgan, strategists predict that without some market stabilisation efforts, Brent could change hands in the $30s per barrel by 2027, a level not seen since the depths of the 2020 oil crash at the start of the COVID-19 pandemic.
Such a move would bring prices near or below the break-even point of around $51 Brent and $43 WTI per barrel for US oil and gas operators.
But strategists at JPMorgan and Goldman Sachs think the oil and gas industry will be forced to act on limiting supply long before prices reach these extremes.
“The magnitude suggested by market imbalances is unlikely to fully materialize in practice. Adjustments are expected on both the supply and demand sides,” JPMorgan strategists wrote.
“We expect the market will find equilibrium through a combination of rising demand — driven by lower prices — and a mix of voluntary and involuntary production cuts.”
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
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