Oil prices could drop 20% in the next 2 years if the US implements tariffs, Goldman Sachs says

Oil prices could struggle in the coming years, Goldman Sachs says.

The firm’s commodities analysts say Brent crude prices could drop to the low $60s per barrel by the end of 2026 if President-elect Donald Trump implements his tariff proposals, or if OPEC+ increases output through next year.

That forecast marks a 20% drop from current prices, and around a 25% drop from this year’s average price of around $80 per barrel. Prices have already seen downward pressure this year amid increasing supply and small demand growth.

The medium-term price risks “skew to the downside because of high spare capacity and because broad tariffs could hurt demand,” the analysts said in a Thursday note.

The analyst’s call comes amid Trump’s proposals for tariffs of 10%-20% on all countries and a 60% tariff on goods from China.

The analysts’ price forecast implies a 10% across-the-board tariff.

Other firms have also warned of a downside risk to oil prices due to Trump’s tariffs. Last week, Bank of America strategist Francisco Blanch said the President-elect’s proposed tariffs will likely curb global trade and spark a trade war, dampening demand and prices.

“America first means commodities second,” Blanch said in an interview with Bloomberg Television.

Trump’s lighter regulatory touch and pro-fossil fuel stance also threaten to boost supply via higher production, posing further downside risk to prices.

During his campaign, Trump vowed to lower energy prices with increased oil production, saying, “We will frack, frack, frack and drill, baby, drill,” at a rally last month. US oil production is already at all-time highs, hitting 13.4 million barrels a day in August for a new monthly record.

The Goldman Sachs analysts say there’s some upside in the short term, though.

The analysts, led by Daan Struyven, forecast Brent prices will rise to $83 by mid-2025 if Iran’s oil supply drops amid a tighter sanctions enforcement. Those prices will then normalize to average $76 over the whole year amid a modest surplus, they say.

“This modest price upside reflects our forecast that the price boosts from a reversal in low valuation and from strategic restocking in the US and China will outweigh the drag from a modest surplus,” the analysts said.

They also point to a pickup in global demand growth next year, including in the US and China, where demand has faltered amid a sluggish economy. The government’s recent stimulus pushes, though, are expected to help consumer sentiment.

Other forecasters have warned of a bigger surplus next year, though. In a report this month, the International Energy Agency said the oil market could see a surplus of one million barrels of crude a day next year, driven by low demand from China and rising output from non-OPEC countries.