Light Crude Oil Poised to Continue Last Week’s Rally as Iran Talks and Supply Risks Dominate
Light crude oil futures closed higher last week with the market poised to continue the rally this week. Most of last week’s rally took place on two days — Wednesday and Thursday. On Friday, the market went out with a whimper as the headline-driven rally fizzled ahead of the weekend. Even with this being called a headline-driven rally, it once again broke down to two factors: supply and demand.
Goldman Sachs Sees a Global Surplus in 2026 — Unless Iran Disrupts Supply
Current supply and future supply are at the forefront right now. The world is well supplied with oil. Over the weekend, Reuters reported that Goldman Sachs said the global oil market is expected to remain in surplus in 2026. In my opinion, that is unless there is a lengthy disruption due to a major supply event.
In making its forecast, Goldman seemed to be hedging its bets. On the bullish side, it raised its Brent and WTI forecasts for the fourth quarter of 2026 by $6 to $50 and $56 a barrel. On the bearish side, it saw downside risks of $5 and $8, respectively, in fourth-quarter 2026 prices.
Iran Disruption Risk vs. Sanctions Relief — Goldman Lays Out Both Sides
Goldman analysts took the bullish position on the risks to lower OECD inventories if there is an Iran-related disruption to supply. On the bearish side, the forecast appears to have priced in the current global glut, no supply disruption, and the possibility of sanctions relief for Iran and Russia that could accelerate landed stock builds and release higher supply over the longer term.
Third Round of U.S.-Iran Nuclear Talks Scheduled for Thursday in Geneva
This week, the United States and Iran are scheduled to hold a third round of nuclear talks on Thursday in Geneva, Oman’s Foreign Minister Badr Albusaidi said on Sunday. This meeting will take place just three days before the start of the 10-to-15-day deadline that President Trump said last week could launch an attack on Iran, or as he put it, “bad things could happen.”
Brent Oil Price Forecast
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See all Brent Oil forecastsHowever, ahead of any attacks, a senior Iranian official told Reuters that Iran has indicated it is prepared to make concessions on its nuclear program in return for the lifting of sanctions and recognition of its right to enrich uranium.
How Much Risk Premium Is Baked Into Current Prices?
Looking at the nearby WTI weekly chart, we’re assuming the market has priced in about $6.00 of risk premium. We base this on the relationship between Friday’s close at $66.48 and the 52-week moving average at $60.63. If we base it on the rally since mid-December from $54.63, the risk premium is closer to $12.00. It’s hard to see crude oil crashing down to those levels if a deal is reached, but it’s important to know if your plan is to chase the market from current price levels.
Technical Outlook: $64.84 to $67.25 Is the Zone That Will Define This Week’s Direction
Our weekly forecast hinges on trader reaction to the retracement zone at $64.84 to $67.25. Holding $64.84 will indicate the presence of buyers, while a breakout over $67.25 will signal strong buying, with the first target at $68.47, followed by $75.05.
A failure to hold $64.84 will be the first sign of weakness, with support layered at $63.34, $60.77, and the 52-week moving average at $60.63.
More Information in our Economic Calendar.