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[LONDON] Oil prices will stay lower for longer after more than halving since June, Goldman Sachs' chief commodity analyst said, arguing in his latest research note that demand growth in China and other emerging economies is set to slow.
Goldman's Jeff Currie, who rose to prominence forecasting oil's spike above US$100 a barrel last decade, said the rise of US shale output had realigned energy markets, making China a bigger and more important consumer than the United States. "For the first time since the 1940s, the US is no longer the world's largest (oil) importer," Currie wrote in the note dated January 26, which is part of the bank's 'Top of Mind'research series on macroeconomic trends.
"It has ceded that dubious position to China, which with other emerging markets is now forced to pay up for the last barrel of oil it needs from the rest of the world. As a result, gone are the days of surging EM (emerging market) oil demand."
The bank, which is arguably the most influential in commodity markets, had already slashed its energy forecasts two weeks ago to predict Brent crude may fall below US$40 a barrel and average just over US$50 this year.
He said in this week's note that the oil crash may be the most "startling and far-reaching market development" since the financial crisis, adding that even if oil prices recover from their recent lows they were unlikely to rebound back to levels at the start of this decade.
Brent hit an all-time high above US$147 a barrel in 2008. It averaged around US$110 a barrel between 2011 and 2013 as supply disruptions helped mask the impact of the US shale boom. "A new equilibrium price will ultimately be found, which will likely be much lower than the price over the past decade,"Currie wrote.
Brent has fallen from above US$115 a barrel in June to a near six-year low of US$45.19 on January 16, as the Organization of the Petroleum Exporting Countries as declined to cut output despite the price slide as it focuses on preserving market share. It traded just above US$48 a barrel on Tuesday.
On Monday Goldman President Gary Cohn, a former oil trader in the bank's J. Aron commodities arm, told CNBC oil prices could fall to US$30 a barrel, about a third below current levels.