Chinatimes Finance APP learned that Goldman Sachs recently lowered its expectations for the international crude oil price benchmark - Brent crude oil price. It is currently expected that the Brent crude oil price in 2025 will fluctuate between $70 and $85 per barrel, with an average price of about $77, which is $5 lower than Goldman Sachs' previous expectation. In comparison, the current trading price of Brent crude oil futures is around $79, and Goldman Sachs' latest expectations indicate that Brent crude oil may continue to be in a downturn throughout 2025.

Goldman Sachs' latest adjustment reflects the increasingly cautious sentiment in the market regarding oil prices, driven by lower-than-expected demand in the Asian market, increased production of shale oil in the United States, and stable global crude oil inventories. At a time when traditional energy industries such as petrochemicals and natural gas are facing declining demand and the irreversible trend of transitioning to low-carbon energy, Goldman Sachs' outlook has pointed out some key factors that may affect oil prices and the overall energy stock market for at least the next few years.

Although the outlook for crude oil prices may seem cautious, the inherent high volatility of international oil prices may create opportunities for retail or institutional investors who are prepared to manage market volatility and excel in trading high-volatility commodities, as they may achieve excess returns. For example, the unresolved geopolitical situation in the Middle East may be a factor driving oil prices higher in the short to medium term. Furthermore, if Trump successfully returns to the White House, his trade protectionism and policy stance against excessive electrification may lead to a sharp increase in the prices of traditional energy stocks.

According to reports, the mining and energy commodities strategy team at the Commonwealth Bank of Australia has recently warned that the risk of escalating tensions and conflicts in the Middle East will continue to drive oil prices higher. The bank stated that in September, the trading price of Brent crude oil futures will be between $75 and $85 per barrel. However, if the hope for a ceasefire in Gaza weakens, and the possibility of Iran retaliating against Israel 'remains', international oil prices may have even greater room for upward movement.

Although Goldman Sachs's forecast indicates that the average trading price of Brent crude oil next year will be around $77, for some market participants, this is still a healthy level. It does not rule out the possibility of the international oil price breaking through the upper limit of $85 as expected by Goldman Sachs in the short term next year, followed by a substantial decline.

The renowned research institution Zacks' research team recently emphasized that the energy sector in the US stock market is still likely to benefit from significant oil price volatility driven by geopolitical tensions, but investors need to be prepared to take quick profits in the short term, considering that macro demand and supply fundamentals do not support a sustained increase in oil prices.

Zacks' research team stated in a recent report that investors interested in the traditional energy sector can try to achieve optimistic investment returns from high-quality energy stocks in the U.S. stock market. The institution recommends energy stocks such as SM Energy Company (SM.US), TechnipFMC plc (FTI.US), and Tullow Oil PLC (TUWOY.US) for layout.

Asian demand is weakening while U.S. crude oil production continues to rise.

An important factor behind Goldman Sachs' revised oil price forecast is the unexpectedly weak growth in crude oil demand from major oil-consuming countries such as China, Japan, South Korea, and India, which are the main engines of global oil consumption.

It is understood that the structural changes in these major Asian oil-consuming countries, including the shift from oil to electricity in the transportation system under the heavy pressure of government carbon reduction, as well as the slowdown in economic growth, have collectively driven the demand for petrochemical products to weaken. Consequently, the investment bank has sharply lowered its forecast for the growth rate of global oil product demand in 2024 from 1.2 million barrels per day to 0.9 million barrels per day. The slowdown in demand from major oil-consuming countries, coupled with the lack of the expected market decrease in international crude oil inventories, undoubtedly puts significant downward pressure on oil prices.

Due to a significant increase in oil production efficiency, U.S. shale oil production is much stronger than expected by the market, which has intensified the market's pessimistic bearish sentiment towards international oil prices. Currently, U.S. crude oil production exceeds Goldman Sachs' previous expectations by about 0.2 million barrels per day, causing oversupply. The investment bank also predicts that OPEC+ may choose to strategically increase supply to regain market share lost by alliance member countries, which is likely to constrain the pace of capacity growth for non-OPEC countries such as U.S. shale oil companies, but this potential trend still has the possibility to further lower crude oil prices.

Supply dynamics and potential oversupply.

Goldman Sachs, a major Wall Street bank, believes that by 2025, the entire crude oil market may shift from a slightly tight supply-demand balance to a potential oversupply. Goldman Sachs' expectation stems from the overall expectation of increasing crude oil supply from OPEC and non-OPEC oil-producing countries.

The bank predicts that OPEC+ member countries will gradually phase out voluntary production cuts before the fourth quarter of 2024, which could lead to an overall oversupply in the crude oil market. Goldman Sachs forecasts that if OPEC member countries completely reverse their production cuts, Brent crude oil prices could drop to a temporary low of $61 per barrel. This scenario will intensify the competitive situation among oil producers and may lead to price reductions to maintain their respective shares of crude oil supply.

Goldman Sachs and Morgan Stanley collaborate to bearish oil price trend.

The latest news shows that the top two investment banks on Wall Street, Goldman Sachs and Morgan Stanley, both predict that the international benchmark for crude oil, Brent crude oil prices, will experience a downward trend, but their predictions have slight differences.

Morgan Stanley's upper limit for the expected Brent crude oil price in 2025 is lower than Goldman Sachs' expectation. Morgan Stanley expects that the Brent crude oil price will decline in 2025. By the end of 2025, the price per barrel is expected to be between $75 and $78. Morgan Stanley also predicts that by the end of 2024, the market will transition from tight to balanced, and there may be an excess supply of crude oil in 2025 due to increased supply from OPEC and non-OPEC oil-producing countries. In terms of the speed and extent of the rebalancing of the crude oil supply and demand market, Morgan Stanley's predictions are slightly more optimistic than Goldman Sachs'.

On the other hand, considering various downside scenarios, Goldman Sachs' predictions appear to be more conservative. For example, if the overall demand of major Asian countries unexpectedly remains unchanged, the Brent crude oil price could still fall to $60 per barrel, which is lower than Morgan Stanley's estimate in the most pessimistic scenario. However, the expectations of the two major Wall Street investment banks can reflect the concerns of institutional investors about supply-demand balance, expansion of non-OPEC countries' inventories, and strategic actions of major oil-producing countries like OPEC focusing on increasing production.

Zacks recommends energy stock enthusiasts to pay attention to these three symbols.

Goldman Sachs' revised outlook undoubtedly rings the alarm for investors who are keen on the traditional energy industry. Slowing demand in Asia, increased shale oil production in the United States, and the potential increase in OPEC supply all indicate that there will be a period of high volatility and uncertainty in the future. However, as predicted by the Commonwealth Bank of Australia, the geopolitical situation has yet to create profit opportunities for oil prices and traditional energy stocks. Investors may be able to achieve short-term profits in the high-volatility trend of oil prices, while energy stocks may benefit from the upward momentum of oil prices and the potential influx of safe-haven funds.

Zacks states that as oil prices adapt to new market dynamics, investing in energy stocks may have the opportunity to benefit from improved energy extraction efficiency, technological advancements, or diversified inflows of safe-haven funds. These investment portfolios often have the ability to withstand sudden pessimistic expectations in the market, such as the global stock market crash triggered by the unwinding of yen carry trades, in which energy stocks appear relatively resilient.

However, Zacks also believes that Goldman Sachs' latest view on the oil market highlights the complexity faced by the traditional energy industry. Investors should remain vigilant and closely monitor the dynamic changes in crude oil supply and demand, geopolitical developments, and the strategic decisions of major oil-producing countries. The institution recommends energy stock enthusiasts to focus on SM Energy, TechnipFMC, and Tullow Oil, emphasizing that these three traditional energy companies have strong fundamental performance, exceeding expectations in the past four quarters, and analysts have recently continued to raise their profit expectations for them, and these stocks have hedging investment value.