Oil prices have significantly dropped this year due to global economic worries and an increase in OPEC production. According to Goldman Sachs, there is a possibility that Brent oil could plummet to below $40 by 2026 in an extreme scenario. This could have an impact on US oil production as prices approach break-even levels, risking limited growth.

Goldman Sachs analysts foresee a potential decline in oil prices to below $40 a barrel in a worst-case scenario, primarily focusing on Brent oil, the global benchmark. Presently, Brent crude oil is valued at around $64 per barrel, while US West Texas Intermediate is about $60 per barrel. Both have seen a 15% decrease in value since the beginning of the year.

Goldman Sachs's base-case projection indicates Brent at $55 and WTI at $51 per barrel by December 2026, provided the US avoids a recession and OPEC's production increases moderately. However, in an unlikely scenario involving a global economic slowdown and a complete rollback of OPEC+ cuts, which would impact non-OPEC supply, Brent could drop to just below $40 a barrel by late 2026. The last time Brent prices fell below $40 was in early 2020.

In the event of a typical US economic downturn, the forecast suggests Brent at $58 per barrel by December 2025 and $50 by December 2026. Given that energy is a critical component for most industries, oil prices are highly sensitive to macroeconomic shifts.

The potential for oil prices to dip below $40 emerged after a recent 7% decline following new US tariffs and an unexpected OPEC+ announcement of increased supply. This led to oil prices dropping to four-year lows on Monday.

While low energy prices align with President Trump's pledge to boost US energy dominance, a sharp decline could contradict his strategy of enhancing fossil fuel production through initiatives like "drill, baby, drill." Considering that US oil production costs are typically higher than in other major oil-producing regions like the Middle East, where breakeven costs are often above $62 per barrel, the current price nearing $60 per barrel could jeopardize growth prospects for US oil companies, as highlighted by Rystad Energy experts.