The Zhitong Finance App learned that although production in the Middle East continues to recover according to Goldman Sachs's previous expectations, Goldman Sachs announced an increase in crude oil price forecasts for two reasons: first, the considerable downside risk in supply is likely to maintain a high risk premium in the near future; second, Goldman Sachs's newly introduced “Global Supply Disruption Reserve” covers the high risk of medium term disruptions and lowered the mid-term global oil production forecast.
Specifically, Goldman Sachs raised its Brent forecast for December this year from $90 to $105, WTI from $81 to $94; the 2027 average price forecast was raised from $80 to $88 (Brent) and $73 to $78 (WTI).
October's increase came almost entirely from risk premiums rather than fundamentals
Goldman Sachs estimates that the estimated risk premium jumped to around $27 per barrel, which explains much of the rise in October Brent spot futures to $118.
In contrast, the bank estimates that Brent's fair value remained largely unchanged in September and October, remaining in the $90 range — because global inventories, the main variable that determines fair value, remained roughly flat. Middle Eastern supply and global oil demand have each adapted to high shipping risks and high oil prices, thus maintaining a basic balance between global production and consumption over the past two months.
Goldman Sachs used a rule of thumb to quantify the extent of fear in the market's current pricing — for every 1 million b/d reduction in supply and continuing for 6 months, the Brent price rises by slightly more than $5. According to this, the $27 premium means that the market has taken into account a 5 million b/d month-on-month decline in production in the Middle East, which continued for six months. Meanwhile, the December 2027 Brent futures rose to a high level of $80, and the December 2028 contract rose to $80, indicating that the market is increasingly concerned about the continued weakness of Middle Eastern exports — possibly due to damage to infrastructure or repeated escalation of shipping attacks.
Adaptation mechanism: basic balance in the global liquid market from September to October
Goldman Sachs estimates that although Persian Gulf production was impacted by 4.4 million b/d from September to October (compared to the 2025 average), the global liquid market remained largely balanced during this period, in stark contrast to the 7.3 million b/d gap in March — the impact was largely offset by three factors: a surplus of 1.1 million b/d in 2025, an increase of 2.1 million b/d in non-Gulf production, and a drop of 1.3 million b/d in global oil demand.
Export data also confirms this adaptation: according to the 14-day moving average, Goldman Sachs estimates that crude oil exports (including shipboard exports) have been at or above the 2025 average in recent weeks, both Persian Gulf exporters and the rest of the world, despite a recent decline.
The upgrade path after the midterm elections: the implied probability of Polymarket rising to about 75% by the end of the year
The reason the risk premium has risen sharply along the entire crude oil futures curve is because the market is increasingly pricing the escalation of the situation after the US midterm elections on November 3 and the subsequent weak supply in the Middle East.
Goldman Sachs quoted Polymarket's implied probability as saying that the probability of “the US-Iran cease-fire ending due to escalation” rose from 10% before the election to about 50% around November 15, and about 75% by the end of the year. Market participants are concerned about three possible US and/or Israeli military actions against Iraq: one is an attack on underground nuclear facilities (such as Pickaxe Mountain) to reduce Iran's nuclear capabilities — US President Trump said on October 15 that the US may have to attack this site linked to Iran's nuclear program; the second is an attack on missile facilities (such as Bandar Abbas) near the Strait of Hormuz to reduce Iran's ability to attack ships; and third, a broader attack on Iran's energy infrastructure (such as power plants, Khark Island) to force The Iranian leadership accepted the US request during the negotiations.
Goldman Sachs pointed out that the risk of Iran and its allies attacking the GCC countries' oil infrastructure is probably highest in the third scenario; Iran has also indicated that it may attack US military bases and other regional infrastructure such as submarine cables, ports, and seawater desalination plants.
Preparing for global supply disruptions: 1 million b/d by 2027
The conflict between the Middle East and Russia and Ukraine is compounded by wider geopolitical divisions, causing a high risk of disruption. Since the timing and location of the disruption is almost impossible to predict, Goldman Sachs's benchmark scenario now includes a global supply disruption allowance of 1 million b/d for 2027 — which means its 2027 global oil production benchmark is 1 million b/d lower than the sum of national benchmarks.
This reserve mainly captures larger disruptions where production in the Persian Gulf may exceed the benchmark. According to national benchmarks, oil production in the Persian Gulf without Iran will return to the 2025 average in the first quarter of 2027 and to the February 2026 level in the second quarter, while Iran's production is lagging significantly behind. At the same time, the reserve also covers non-zero probability of interruptions above the benchmark in other high-risk regions (particularly Russia, Kazakhstan, Nigeria, Libya, and Sudan in Africa).
The assumption of 1 million b/d is slightly higher than the median of 700,000 b/d of “accidental damage to global oil production” in modern history (sample from January 2012 to September 2026). Goldman Sachs's argument is that the ongoing conflict between the US, Iran, Russia, and Ukraine means a higher risk of interruption than normal. As a reference, the three major global oil supply shocks since 1980 are Iraq's invasion of Kuwait in 1990 (6.3% impact on global annual production), the 1980 war between Iran and Iran (5.9%), and the 2026 Hormuz crisis (5.5%).
Risks are more symmetrical, but there is still a net upward trend
Goldman Sachs said that the risk of the price forecast after the increase is more balanced than before, but it still maintains an upward slope:
Upside scenario: If the Gulf average production in 2027 is 3.5 million b/d lower than its 2025 average (1.1 million b/d higher in the benchmark situation), Brent could hit $140 per barrel, with an average price of about $130 in 2027. The most likely upward triggers are increased shipping attacks, damage to oil infrastructure, and a more protracted risk premium.
Downside scenario: If the Gulf average production in 2027 were 2.5 million b/d higher than the 2025 level, and the supposed interruption in global supply reserves did not occur, Brent could fall into the $60 range in 2027. The most likely downside triggers are a faster recovery in production in the Middle East, and/or a faster fall in risk premiums (such as reaching diplomatic agreements that the market sees as credible and sustainable).
In terms of modeling, Goldman Sachs is based on “historically a risk premium of slightly above 80% continuing until next month,” assuming a premium of $16 in the fourth quarter of 2026 and $7 in the second quarter of 2027; and assuming that the $9 structural boost to long-term fair value implemented at the beginning of the war continued throughout the forecast period — the risk of structural disruptions in supply and idle production capacity increased, and higher prices were needed to stimulate production.
Forecast table: The near end is up, and the far end is instead down
Goldman Sachs's full forecast table shows that the increase is concentrated in the near end. Brent's quarterly path is: $108 (original 95) in the fourth quarter of 2026, 98 (original 87), second quarter 90 (original 82), third quarter 84 (original 77), fourth quarter 79 (original 75); monthly November 110 (original 95), December 105 (original 90). In terms of average annual prices, it was raised from 90 to 93 in 2026 and from 80 to 88 in 2027.
Notably, the far end was lowered: Brent's average price dropped from 75 to $73 in 2028, 75 to $74 in 2029; WTI dropped from 70 to $66 in 2028 and 70 to $69 in 2029. This is consistent with its judgment that “the benchmark situation is still below the forward curve” — Goldman Sachs assumes a gradual easing of extremely high risk premiums and continued recovery in Persian Gulf production: its 2027 Brent benchmark of $88 is lower than the forward period of about $94 for the same period.
Market background
The report was released on November 1. On the previous trading day (October 30), Brent's December contract settlement price was $117.64 per barrel, up 2.40%, hitting an intraday high of $118 in the intraday period; WTI's December contract reported $104.12, up 2.08%. The seven core OPEC+ member states decided to keep production quotas unchanged in December at an online meeting on November 1.