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Goldman Sachs slashes oil price forecasts
[LONDON] US bank Goldman Sachs slashed its oil forecasts on Monday, saying fuel prices needed to stay low for much longer in order to curb production and end a global supply glut.
Goldman Sachs oil analysts led by Jeffrey Currie said the collapse in oil prices over the last six months, which has brought North Sea Brent crude down almost 60 per cent to below US$50 a barrel, would eventually balance the market.
But they said crude oil prices could come down much further in the short term, possibly into the high US$30s a barrel before the market saw a rebound.
Goldman Sachs is one of the most influential US banks in commodities markets. In 2008, when oil prices were racing up towards their all-time high at almost US$150 a barrel, the bank forecast crude could hit US$200.
The bank said on Monday it had cut its 2015 forecast for Brent to US$50.40 a barrel from US$83.75 and reduced its 2015 WTI price forecast to US$47.15 per barrel from US$73.75.
For 2016, Goldman Sachs sees Brent at US$70 and WTI at US$65, down from US$90 and US$80 respectively.
In the short term, Goldman Sachs was even more bearish: "To accommodate the substantial expected first half inventory build and using the storage arbitrage to the one-year ahead swap, we are revising down our 3-, 6- and 12-month price forecasts for Brent to US$42, US$43 and US$70 respectively, from US$80, US$85 and US$90," the bank said in a report to clients.
WTI 3-, 6- and 12-month price forecasts have been cut to US$41, US$39 and US$65 from US$70, US$75 and US$80 a barrel.
"While history would suggest that a storage blow-out would push spot prices below US$35, we believe that by avoiding breaching storage capacity, the market will hover around US$40, potentially dipping at times into the high US$30s which we see as the likely lows of this cycle," the report said.