U.S. investment bank Goldman Sachs (GS) is warning that crude oil prices could fall below $40 a barrel in an “extreme scenario” as the risk of a global trade war escalates and supplies rise.
Analysts at Goldman Sachs issued the warning after lowering their oil forecasts twice in the past week. The warning also comes as OPEC+ raises its production even as global energy demand weakens. However, the $40 per barrel scenario does not represent the investment bank’s current base-case forecast that has Brent crude oil, the international standard, at $55 by year’s end.
Rather, $40 a barrel oil represents a worst-case scenario should an all-out trade war erupt and the global economy fall into recession. The global oil market has been rocked as the U.S. escalates its trade war, notably with China, the world’s largest energy importer. The dire forecast is adding downward pressure to stocks of oil majors such as Occidental Petroleum (OXY), British Petroleum (BP), and Chevron (CVX).
Production Increase
The OPEC+ cartel has announced plans to increase production and add more barrels of crude oil to its daily output after a prolonged period of supply constraints. The result has been that several banks, including Goldman Sachs and Morgan Stanley (MS), have revised down their forecasts for oil prices this year and leading into 2026.
Goldman Sachs’ latest oil forecast is contained in a report titled “How Low Could Oil Prices Go?” Brent crude oil is currently trading at $64.80 a barrel, near a four-year low. West Texas Intermediate (WTI) crude oil, the U.S. benchmark, is trading at $61.42 per barrel, also a multi-year low.
Is CVX Stock a Buy?
The stock of Chevron has a consensus Strong Buy rating among 14 Wall Street analysts. That rating is based on 11 Buy and three Hold recommendations assigned in the past three months. The average CVX price target of $176.00 implies 23.34% upside from current levels.
