Trade war escalation combined with OPEC+ production increase, Goldman Sachs simulates "extreme scenario" of crude oil falling below $40 per barrel.

After lowering oil price expectations twice in a week, a recent report from Goldman Sachs pointed out that, with the escalation of the trade war and an increase in supply, there is a possibility for Brent crude oil to fall below $40 per barrel under "extreme circumstances". Analysts led by Yulia Grigsby stated in a report on April 7th, "In a more extreme and low probability scenario of global GDP growth slowing down and OPEC+ completely terminating production cuts agreement, we expect Brent oil prices to fall below $40 by the end of 2026." However, the report emphasized that this is not their base case scenario - currently, Goldman Sachs' baseline expectation for Brent oil price in December next year is $55. With the Trump administration escalating the trade war, coupled with retaliatory measures from countries like China, the risk of economic recession has intensified and cast a shadow over energy consumption, leading to recent volatile fluctuations in the global oil market. At the same time, OPEC+, which had been limiting production for a long time, has unexpectedly shifted towards increasing production by a much larger extent than market expectations. In this context, major banks such as Goldman Sachs, Morgan Stanley, and French Industrial Bank have all lowered their baseline oil price forecasts, and have simulated bullish and bearish extreme scenarios for different situations - a common practice in the commodities forecasting field aimed at evaluating price fluctuations under various conditions. Goldman Sachs analysts in a report titled "Where is the bottom of oil prices?" stated that, assuming a "typical" economic recession in the United States along with their baseline supply expectations, Brent oil prices are expected to reach $58 in December this year and may fall to $50 in the same period next year. As of the time of writing, Brent crude oil was hovering around $65 per barrel, reaching a four-year low earlier this week.