Crude prices fell sharply after OPEC+ surprised markets with a bigger-than-expected production hike. This prompted Goldman Sachs to slash its oil price outlook and triggered a selloff in U.S. energy stocks.
In a note shared Monday, Goldman Sachs commodity analyst Daan Struyven said the bank lowered its oil price forecast by $2 to $3, projecting Brent and WTI to average $60 and $56, respectively, for the rest of 2025, and $56 and $52 in 2026.
"Our key conviction remains that high spare capacity and high recession risk skew the risks to oil prices to the downside despite relatively tight spot fundamentals," Struyven said.
What Prompted The Oil Selloff?
West Texas Intermediate futures opened at $55.36 per barrel Sunday evening in New York before recovering slightly to $57.10 by early Monday morning.
The drop was fueled by OPEC+'s Saturday decision to increase production by 411,000 barrels per day starting in June, a level in line with Goldman's base-case scenario.
According to the note, the move likely reflects a combination of low oil inventories due to underproduction in Venezuela and the U.S. shale patch, as well as a push to bring laggard members like Iraq and Kazakhstan back in line with output targets.
"The new baseline size of production increases is likely 0.41mb/d (million barrels per day)," Goldman said, projecting another similar hike in July.
Reuters reported that five OPEC+ sources suggested additional 411,000 bpd increases in August, September and October could follow if compliance issues persist. Although not confirmed by official OPEC channels, the market appeared to take this guidance seriously.
Brent Could Slide To $40 by 2026 In Bearish Scenario
Goldman models a steep downside scenario if production continues ramping while the economy slows.
If the 2.2 million barrels per day in cuts are fully reversed through 0.41 mb/d monthly hikes, Brent crude could drop to the high $40s by late 2026 and WTI to the mid-$40s.
In a global recession, Brent could plunge to $40 and WTI to the high $30s.
While this outcome is less likely, Goldman said, the risk profile is skewed toward the downside given ample spare capacity and the possibility of further supply increases.
Despite this bearish tilt, the bank still recommends hedging downside risk using structured options strategies. It maintains a June 2026 Brent three-way position: selling a $75 call to fund a 55/45 put spread.
Energy Stocks Drop As Crude Slides
The Energy Select Sector SPDR Fund (NYSE:XLE) fell 1.3% Monday as oil stocks responded swiftly to the OPEC+ announcement.
Exxon Mobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX) dropped 1.9% and 1.7%, respectively.
APA Corporation (NASDAQ:APA), ONEOK, Inc. (NYSE:OKE), and Occidental Petroleum Corporation (NYSE:OXY) each fell by about 3%.
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