December 2025 | Daan Struyven | Managing Director | Co-Head of Commodities Research; Head of Oil Research | | --- | --- | --- | | Goldman Sachs & Co. LLC | +1 212-357-4172 | daan.struyven@gs.com | | Yulia Z Grigsby | Vice President | Senior Commodities Strategist | | Goldman Sachs & Co. LLC | +1 917-709-0571 | yulia.grigsby@gs.com | Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure A ...

Summary of J.P. Morgan Oil Outlook 2026/2027 Industry Overview - The report focuses on the global oil industry, specifically analyzing supply and demand dynamics, price forecasts, and production trends for the years 2026 and 2027 [2][3][72]. Key Points Oil Demand and Supply Dynamics - Global oil demand is projected to grow robustly, increasing by 0.9 million barrels per day (mbd) in 2025 to reach 105.5 mbd, with further acceleration to 1.2 mbd in 2027 [2][72]. - In contrast, global oil supply is expected to expand at three times the rate of demand in 2025 and 2026, leading to a significant surplus [2][72]. - Non-OPEC+ producers will drive half of the supply gains, particularly through offshore developments and shale production [2][72]. Offshore and Shale Production - The offshore sector is anticipated to contribute 0.5 mbd of growth in 2025, increasing to 0.9 mbd in 2026 and 0.4 mbd in 2027, benefiting from low costs and high visibility on new projects [2][72]. - Global shale production is projected to rise by 0.8 mbd in 2025, with further increases of 0.4 mbd in 2026 and 0.5 mbd in 2027, despite a slowdown in U.S. shale growth [2][72]. Inventory and Price Forecasts - Global observable inventories have surged by 1.5 mbd, primarily driven by oil-on-water and stocks in China, contributing to a projected surplus of 2.8 mbd in 2026 [2][72]. - Brent prices are expected to decline below $60 in 2026 and average $42 in 2027, with prices potentially sliding into the $30s by year-end [2][72][24]. Refining Margins - Refining margins are expected to remain elevated, with gasoline cracks averaging $18/bbl and diesel cracks reaching $31/bbl in the U.S. for 2026 [4][72]. Market Adjustments - The report suggests that the market will find equilibrium through a combination of rising demand due to lower prices and a mix of voluntary and involuntary production cuts [2][45]. - A proactive approach to production cuts is recommended to stabilize prices before they decline significantly [27][45]. Geopolitical Factors - The report discusses potential geopolitical risks, including sanctions on Russian and Iranian oil exports, which could impact supply dynamics [26][61]. - Venezuela's political situation is highlighted as a potential upside risk to global oil supply, with the possibility of increased production following a regime change [61][66]. Non-OPEC Supply Growth - Non-OPEC supply is projected to rise by approximately 1.1 mbd in 2026, with significant contributions from the U.S., Brazil, Canada, Guyana, Argentina, and Norway [72][75]. - The offshore sector and shale production are identified as dual engines of growth for non-OPEC supply [72][75]. Conclusion - The overall outlook indicates a challenging environment for oil prices due to abundant supply and geopolitical uncertainties, with a need for strategic adjustments in production to maintain market stability [2][72][45].

Summary of J.P. Morgan Commodities Derivatives 2026 Outlook Industry Overview - **Industry**: Commodities, specifically focusing on oil and precious metals volatility into 2026 [1][2] Key Insights on Oil Market - **Oil Price Trends**: Analysts expect a gradual decline in oil prices, targeting $55 per barrel by the end of 2026, which will likely lead to subdued oil volatility [5][24] - **Volatility Dynamics**: Oil volatility has softened towards year-end, with options markets pricing a quieter 2026 while maintaining a risk premium for potential spikes [5][20] - **Market Strategies**: - Efficient downside exposure can be achieved through Brent put spreads or ratio put spreads, offering attractive payout-to-cost ratios [5][24] - Selling vega-neutral M6/M12 Brent calendar spreads is recommended to mitigate exposure to adverse market moves [5][31] - **Current Volatility Metrics**: The realized/implied Brent volatility ratio is near a multi-year low, indicating a consolidation phase in the market [13][14] Key Insights on Precious Metals Market - **XAU Volatility Trends**: XAU implied volatility has surged by 7 points compared to the previous year, averaging 8-10 points above the ten-year pre-COVID historical norm [41] - **Market Performance**: Systematically selling volatility in precious metals has been unprofitable, with XAU exhibiting a negative volatility risk premium of approximately 1.5 vol on average [44][45] - **Trading Strategies**: - Suggested trading structures include zero-cost XAU inverse ratio digital call spreads and discounted dual digital options to capture gold upside while minimizing capital deployment [5][66][69] - The current environment is seen as attractive for positioning to capture further upside momentum in gold, with potential targets of $4,655 by Q2 2026 and $5,055 by Q4 2026 [59] Additional Insights - **Volatility Curve Analysis**: The precious metals volatility curves are excessively inverted, indicating potential mispricing in the market [54] - **Skew Analysis**: The skew premium for XAG calls over XAG puts appears excessive, suggesting a divergence in market expectations [55] - **Geopolitical Factors**: Ongoing geopolitical tensions and skepticism about the US dollar are driving demand for gold as an alternative reserve asset [59] Conclusion - The outlook for both oil and precious metals indicates a complex interplay of declining prices and volatility dynamics, with strategic trading opportunities identified for investors looking to navigate these markets effectively.

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the oil industry, specifically the impact of potential Russia-Ukraine peace negotiations on crude and refined product prices. Core Insights and Arguments - **Crude Price Decline**: Brent crude prices have decreased by 5% to $62 per barrel as the market reassesses the likelihood of a Russia-Ukraine peace deal [1][2] - **Downside Risks**: There are estimated downside risks of $4-5 to Brent/WTI price forecasts for 2026 due to a potential peace deal, which could lead to a gradual recovery in Russian production and increased oil inventories in OECD pricing centers [1][5] - **Refined Product Prices**: A stronger immediate decline in refined product prices is expected due to: 1. A 0.9 million barrels per day (mb/d) decline in Russian refined product exports since March 2022, while crude exports have remained stable [1][15] 2. Higher geopolitical risk premiums currently priced into product margins compared to crude prices [1][21] 3. Potential normalization of freight rates if voyage journeys shorten [1][23] - **European Diesel Margins**: European diesel margins have dropped nearly 25% to $28 per barrel, reflecting the market's reaction to renewed peace talks [2] Additional Important Insights - **Production Forecasts**: The base case assumes that sanctions on Russia's oil sector will persist, leading to a decline in Russian liquids production to 9.0 mb/d by the end of 2027 from 10.1 mb/d in Q4 2025 [3] - **Gradual Recovery**: Even with the removal of sanctions, a gradual recovery in Russian oil production is expected due to structural issues such as technological and operational bottlenecks [6] - **Oil on Water**: The volume of Russian crude on water has increased by approximately 80 million barrels since the start of the war, which could lead to a reduction in prices if sanctions are lifted [7][10] - **Market Dynamics**: The ongoing conflict has tightened refined product markets more than crude markets, with significant declines in diesel and gasoil exports following EU sanctions [18] - **Risk Premiums**: A $7 per barrel premium for European gasoil/diesel margins over Brent is attributed to risks associated with Russia [22] - **Freight Rates**: Sanctions have shifted Russian oil flows from West to East, increasing tanker freight rates by around $3 per barrel since the war began [23] Recommendations - Investors are advised to short the 2026Q3-Dec2028 Brent timespread and for oil producers to hedge against 2026 price downside, while consumers should hedge against price increases expected from 2028 [27][28]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Global Oil Industry**, particularly the dynamics of **OPEC+** and non-OPEC+ supply and demand forecasts for 2025 and 2026. Core Insights and Arguments 1. **Supply and Demand Balances**: - The overall oil market is projected to have a surplus of **1.9 million barrels per day (Mb/d)** for both 2025 and 2026, with a looser balance by **290 kb/d** for 2025 and **260 kb/d** for 2026 [2][18][61]. - Inventory builds averaged **1.2 Mb/d** from 1Q25 to 3Q25, with missing barrels reported at **0.8 Mb/d** [2][61]. 2. **Demand Forecasts**: - Demand growth estimates vary: IEA forecasts **0.8 Mb/d** for 2025, EIA at **1.1 Mb/d**, and OPEC at **1.3 Mb/d** [3][36]. - UBS maintains its estimates at **0.9 Mb/d** for 2025 and **1.1 Mb/d** for 2026, incorporating a better global economic outlook but offset by weaker Chinese demand [29][64]. 3. **Non-OPEC+ Supply Growth**: - Non-OPEC+ supply growth is revised up by **100 kb/d** for 2025 to **1.5 Mb/d** and by **180 kb/d** for 2026 to **0.6 Mb/d**, driven by resilient US production [4][39][69]. - US liquids growth is expected to be **0.6 Mb/d** in 2025 and **0.1 Mb/d** in 2026, reflecting improved drilling efficiency and rig activity [51][55]. 4. **OPEC+ Production Adjustments**: - OPEC+ output decreased by **400 kb/d** month-on-month in October, primarily due to maintenance in Kazakhstan [5][94]. - The eight countries implementing voluntary cuts paused production increases in 1Q26, with plans to resume unwinding cuts from April 2026 [68][98]. 5. **Geopolitical Risks**: - Geopolitical factors, including sanctions on Russia and Iran, pose significant risks to the oil market [65][66]. - Russian crude exports have decreased by **100 kb/d** to **4.4 Mb/d**, with major importers reducing their imports [65]. 6. **Price Forecasts**: - Brent prices are expected to remain in the low-$60s in the near term, with potential upside to **$70/bbl** due to supply disruptions or better OPEC+ compliance [9][10]. - A downside scenario could see Brent prices drop below **$60/bbl** if OPEC+ production increases continue amid a global economic slowdown [11]. Other Important Insights - The report highlights the mixed revisions in demand forecasts from various agencies, with the IEA being more bullish compared to the EIA's bearish outlook [3][36][22]. - The concept of "missing barrels" suggests that actual demand may be underestimated, indicating that the market may not be as oversupplied as it appears [25][61]. - The long-term outlook anticipates peak oil demand around **2030**, with a plateau expected rather than a sharp decline thereafter [71]. This summary encapsulates the critical aspects of the conference call, providing a comprehensive overview of the current state and future expectations of the global oil market.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Oil, Gas, and Chemical Sector in China - **Outlook Period**: 2026-2028 Oil Market Insights - **Brent Crude Price Forecast**: UBS projects average prices of US$64, US$70, and US$75 per barrel for 2026, 2027, and 2028 respectively [7][10][12] - **OPEC+ Production Cuts**: The second tranche of OPEC+'s voluntary cuts of 1.65 million barrels per day (Mb/d) may conclude in December 2026, with effective production increases expected to be only 40% of the headline numbers [2][24] - **China's Oil Demand**: Anticipated declines in gasoline and diesel demand by 4.4% and 3.7% year-over-year (YoY) in 2025 and 2026 respectively, driven by the rise of electric vehicles (EVs) [2][53] Natural Gas Market Insights - **Asia LNG Price Forecast**: Expected prices of US$12.8 and US$11.5 per million British thermal units (MMBtu) for 2025 and 2026 respectively, with long-term prices approaching US$7-8/MMBtu [2][41][47] - **China's Natural Gas Demand Growth**: Projected compound annual growth rate (CAGR) of 3-4% from 2025 to 2030, despite a 1% YoY decline in H1 2025 due to various economic factors [48][52] Chemical Sector Insights - **Earnings Recovery**: The petrochemical industry is expected to rebound due to overseas capacity exits and China's anti-involution policies [3] - **Preferred Sectors**: Recommendations include PTA, silicone, and glyphosate sectors, focusing on industries with low profitability and potential for improved utilization rates [3] New Materials Insights - **Lithium Hexafluorophosphate (LiPF6)**: Prices expected to remain strong in 2026, with demand growth outpacing effective capacity growth [4] - **Memory Chip Cycle Recovery**: Anticipated support for earnings rebound for electronic gas and wet chemical producers [4] Stock Recommendations - **Oil Companies**: Favorable outlook for PetroChina A/H, CNOOC A/H, and Sinopec A/H due to expected recovery in oil prices and attractive dividend yields [5] - **Chemical Companies**: Recommendations include Wanhua Chemical, Baofeng Energy, and Hengli Petrochemical [5] - **New Materials**: Positive outlook for Capchem, Sinocera, and Jiemei as beneficiaries of the electrolyte and MLCC cycle recoveries [5] Risks and Considerations - **Oil Price Risks**: Potential upside risks include firmer global economic growth and geopolitical tensions, while downside risks involve a global economic slowdown and weaker compliance from OPEC+ [9][10] - **Natural Gas Market Volatility**: Expected tightness in the global LNG market until 2030, with potential disruptions leading to elevated prices [41][47] Additional Insights - **EV Penetration**: Domestic EV penetration in China has exceeded 50% since April, with expectations to reach 76% by 2030 [54][55] - **China's Crude Imports**: A 3% YoY increase in crude imports in 9M25, attributed to lower oil prices and inventory scaling [60]

Summary of Oil Price Forecasts Through 2035 Industry Overview - The report focuses on the oil industry, specifically the Brent and WTI crude oil prices forecast through 2035, highlighting supply and demand dynamics and investment implications [2][7][8]. Key Points and Arguments Oil Price Forecasts - **2026 Price Decline**: Forecasts indicate Brent and WTI prices will decline to averages of $56 and $52 respectively in 2026 due to a significant surplus of 2.0 million barrels per day (mb/d) driven by strong global supply outside of Russia [2][4][8]. - **2027 Price Recovery**: Prices are expected to recover in 2027 as the market balances, with a shift to a deficit anticipated in the second half of 2027 due to low prices affecting non-OPEC supply and increasing demand [2][29][30]. - **Long-Term Price Increase**: By late 2028, Brent and WTI prices are projected to rise to $80 and $76 respectively, necessary to incentivize investment and balance the market in the early 2030s [2][42][45]. Supply and Demand Dynamics - **Supply Wave Impact**: The 2025-2026 supply wave, resulting from long-cycle projects delayed during the pandemic, is expected to keep the market in surplus [2][8][18]. - **Demand Growth**: Global oil demand is projected to grow by 1.1 mb/d in 2025 and 1.2 mb/d in 2026, primarily driven by solid GDP growth and demand from Asia excluding China [24][81]. - **Russia's Supply Decline**: Russia's oil production is expected to decline from 10.1 mb/d in Q4 2025 to 9.0 mb/d by the end of 2027, contributing to the overall supply dynamics [24][64]. Investment Implications - **Investment Needs**: The forecasted long-run prices of $80 Brent are deemed necessary to stimulate investment in oil production, particularly in non-OPEC regions, to counteract natural declines in existing fields [2][42][45]. - **Recommendations for Stakeholders**: - **Investors**: Recommended to short the 2026Q3-Dec2028 Brent timespread to capitalize on the anticipated surplus [72]. - **Oil Producers**: Suggested to hedge against potential price declines in 2026 due to supply resilience and recession risks [73]. - **Oil Consumers**: Advised to hedge against long-run price increases from 2028 onwards, while waiting for more favorable pricing in 2026 [74]. Risks and Uncertainties - **Price Risks**: The forecasts for 2026 and 2027 carry two-sided risks; prices could fall into the $40s if non-OPEC supply remains resilient or if a recession occurs, while they could rise above $70 if Russian supply drops sharply [2][48][56]. - **Long-Term Uncertainties**: Long-term price forecasts are subject to significant uncertainties due to technological advancements, geopolitical factors, and the impact of low-carbon alternatives on demand [2][56][57]. Historical Context - The report references historical price volatility influenced by various factors, including geopolitical events and supply shocks, illustrating the unpredictability of oil prices [9][11]. Additional Important Content - **Forecasting Framework**: The report introduces a new framework for estimating long-dated prices, emphasizing the relationship between spot prices and long-term investment incentives [12][84]. - **Global Inventory Trends**: Recent increases in global visible oil inventories support the surplus estimates, indicating a need for lower prices to restore market balance [23][90]. This comprehensive analysis provides insights into the expected trajectory of oil prices, the underlying supply and demand factors, and the implications for various stakeholders in the oil market.

Summary of Global Oil Demand Forecast through 2040 Industry Overview - The report focuses on the global oil industry, specifically forecasting oil demand growth through 2040, highlighting the impact of energy demand and low-carbon technology limitations [2][4][8]. Key Forecasts and Insights - **Oil Demand Growth**: Global oil demand is projected to increase from 103.5 million barrels per day (mb/d) in 2024 to 113.0 mb/d in 2040, with an annual average growth rate of 0.6 mb/d (0.5% CAGR) [2][8]. - **Road Transportation**: Oil demand for road transportation is expected to rise until 2030, driven by the growth in electric vehicle (EV) sales and LNG trucks in China. A peak is anticipated in 2030, followed by a gradual decline [2][18][20]. - **Air Transportation**: Air transportation oil demand is forecasted to grow at an annual average rate of 2.4% (0.2 mb/d) through 2040, primarily due to rising incomes in non-OECD countries [2][26]. - **Petrochemical Demand**: As road oil demand plateaus, petrochemical demand (naphtha, ethane, LPG) is expected to become the main driver of oil demand growth, with an average annual growth rate of 0.5 mb/d (2.1% CAGR) [2][32]. Supporting Arguments - **Drivers of Oil Demand**: - Limited alternatives for jet fuel and petrochemicals due to technological bottlenecks [2][12]. - Energy demand growth is expected to outpace oil displacement by low-carbon alternatives, leading to a long plateau in road oil demand post-2030 [2][57]. - An indirect boost to oil demand from AI is estimated at 3 mb/d by 2040, linked to higher global GDP [2][49]. Risks and Challenges - **Downside Risks**: Potential faster advancements in low-carbon technologies and the lingering effects of economic recessions pose risks to the long-term oil demand forecast [2][67]. - **Refining Margins**: High refined product margins are anticipated to persist, as uncertainty regarding long-term demand has led to reduced refining capital expenditures [2][67]. Additional Insights - **Regional Variations**: Non-OECD countries are expected to drive over 90% of petrochemical oil demand growth, particularly in China and the Middle East, while OECD consumption is declining due to rising costs and ESG concerns [2][37]. - **Power Generation**: Oil demand for power generation is projected to decline significantly, with an expected 80% drop by 2040, primarily due to a shift towards natural gas and renewable energy sources [2][43][45]. Conclusion - The report presents a solid outlook for global oil demand growth over the next decade, with significant contributions from petrochemicals and air transportation, while acknowledging the potential for downside risks from technological advancements and economic fluctuations [2][51].

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **oil market**, specifically discussing the dynamics of crude oil and diesel prices, supply-demand balances, and inventory levels. Core Insights and Arguments 1. **Diesel Tightness and Crude Support**: Severe diesel tightness, driven by low inventories, refinery closures, and sanctions on Russian refineries, is supporting crude prices. This tightness is reflected in both flat prices and market structure [7][24][26]. 2. **Decline in Russian Crude Offtake**: There has been a recent decline in the offtake of Russian-origin crude, shifting demand to other crudes, including Brent-linked grades [7]. 3. **Global Inventory Trends**: Global inventories have built up by approximately **2.4 million barrels per day (mb/d)** over the last three months, which is expected to continue into the first half of 2026. This could lead to a contango market structure and Brent prices stabilizing around **$60 per barrel** [7][21]. 4. **Demand Growth Projections**: Demand growth is projected to reach **0.85 mb/d in 2025** and **0.90 mb/d in 2026**, which is below the historical trend of **~1.2 mb/d** but an improvement from earlier forecasts [7]. 5. **Non-OPEC Supply Growth**: Non-OPEC supply is expected to grow by **1.2 mb/d** in 2025, primarily driven by countries like Canada, Brazil, Guyana, Argentina, and the US. However, growth is anticipated to slow significantly in 2026 [7]. 6. **OPEC Production Cuts**: OPEC has unwound **2.6 mb/d** of production cuts since March, but actual production has only increased by **0.84 mb/d**, indicating diminishing spare capacity within the group [7]. 7. **Surplus and Rebalancing**: A large surplus is expected in the near term, reaching **~3 mb/d in 1H26**, but signs of rebalancing may emerge by the second half of 2027, potentially supporting Brent prices to **~$65 per barrel** [7][17]. Additional Important Insights 1. **Refinery Closures Impact**: Key refinery closures in regions like Grangemouth and Wesseling have contributed to the diesel tightness, alongside low inventories in critical areas such as the US and ARA region [26]. 2. **Geopolitical Factors**: Sanctions and attacks on Russian refineries have led to lower supplies from Russia, further tightening the market [26][29]. 3. **Market Structure Changes**: The forward curve is likely to move into contango, making oil storage economically attractive, with spot prices needing to remain around **$60** [21][40]. 4. **Price Dynamics**: The correlation between oil prices and interest rates has trended lower, and oil is considered relatively cheap in currencies like the Mexican peso and Brazilian real due to dollar weakness [68][64]. This summary encapsulates the critical points discussed in the conference call, providing a comprehensive overview of the current state and future outlook of the oil market.

Summary of the Conference Call on North American Midstream & Renewable Energy Infrastructure Industry Overview - The report focuses on the North American midstream sector, particularly how crude oil prices, specifically WTI (West Texas Intermediate), influence midstream stocks performance [1][2]. Key Insights - A quantitative analysis was conducted to understand the historical relationship between WTI prices and individual midstream stocks, aiming to prepare investors for potential near-term oil price declines [9][10]. - The report indicates that midstream stocks exhibit negative convexity to oil prices, meaning they tend to decline more sharply when WTI prices fall than they rise when prices increase [10]. - Current market conditions show that WTI has decreased by 24% since its recent peak in January 2025, which is in the $60 price band, a scenario that correlates with higher risks for midstream stocks [10]. Investment Recommendations - The report suggests a cautious approach, recommending to consider long positions in specific midstream stocks such as TRGP (Overweight), OKE (Overweight), WBI (Equal-weight), and PAA (Equal-weight) if WTI falls below $55 per barrel [10][12][15]. - The valuation of these stocks appears inexpensive, but a more aggressive capital allocation is advised only if WTI drops to the $50-$55 range [12][15]. Market Dynamics - The report highlights that the potential for a global oil market oversupply could lead to further downside risks for oil-levered midstream equities [12]. - Despite the current lag in performance of oil-levered midstream equities during recent down days for crude oil, the long-term contracted nature of most midstream companies provides cash flow resiliency and limits funding risks [12]. Correlation Analysis - The report includes various exhibits showing the correlation between WTI prices and midstream companies over the years, indicating that correlations tend to be higher during periods of significant price movements [16][17]. - Historical data from 2014 to 2025 shows varying degrees of correlation between WTI and midstream stocks, with a notable increase in correlation during downturns [17]. Conclusion - The North American midstream sector is currently viewed as attractive, but investors are advised to remain patient and strategic in their approach, particularly in light of potential oil price corrections and the associated risks for midstream equities [8][12].