Within a week, Goldman Sachs cut its oil price target twice, predicting that in extreme cases, crude oil could fall below $40

With the escalation of trade frictions and increased supply, the crude oil market is facing a new round of turbulence.

Several institutions, including Goldman Sachs, Morgan Stanley, and Société Générale, have lowered their fundamental oil price forecasts. Goldman Sachs analysts, including Yulia Grigsby, warned in a report on April 7 that under extreme circumstances, Brent crude oil prices could fall below $40.

"If global GDP slows simultaneously and OPEC+ completely cancels production cuts, this will constrain supply from non-OPEC oil-producing countries. We estimate that Brent crude oil prices will fall to slightly below $40 per barrel by the end of 2026."

Goldman Sachs expects Brent crude oil prices to be lowered by $4 to $62 in December 2025, and WTI crude oil to be lowered to $58; by 2026, the average forecast for Brent is $58 and WTI is $55. As of the time of writing, Brent oil prices have fallen to $64.

Economic Weakness Leads to Further Oil Price Reductions

Goldman Sachs analysts have lowered their oil price forecasts twice in recent days, primarily due to the bank's economists revising down GDP growth expectations for several regions.

The latest report shows that U.S. economists have lowered their GDP growth forecast for the fourth quarter of 2025 compared to the same period last year from 1.0% to 0.5%, while raising the probability of a U.S. recession over the next 12 months from 35% to 45%.

Goldman Sachs has also lowered its crude oil demand growth expectations for 2025 and 2026 to 300,000 barrels per day and 400,000 barrels per day, respectively, down from the previous forecast of around 600,000 barrels per day. The main reason for this downgrade is that the negative impact of slowing GDP growth will outweigh the positive effects of dollar depreciation and falling oil prices. Research shows that a 10% decline in the trade-weighted dollar index can increase global crude oil demand by about 350,000 barrels per day.

On the supply side, Goldman Sachs expects crude oil production in the contiguous 48 states of the U.S. to decline from a peak of 11.4 million barrels per day in March 2025 to 11.3 million barrels per day by December 2026, significantly lower than the January forecast of 11.9 million barrels per day. Despite significant uncertainty regarding OPEC+ compliance and production, analysts still expect OPEC+ to increase production by about 700,000 to 800,000 barrels per day within four months.

Goldman Sachs points out that the current economic environment still carries significant downside risks, especially due to the possibility that OPEC+ supply may exceed expectations. Additionally, although implied volatility has risen, it is still considered overvalued.

Goldman Sachs recommends that for oil producers, buying put options to hedge against the risk of falling crude oil prices remains attractive. For macro investors, crude oil put options continue to be an appealing tool for hedging against recession