Investment bank predicts average price of $45 a barrel next year, but lower isn’t implausible
Goldman Sachs has bad news for anyone banking on the oil price rebounding any time soon, saying in a report that the price of crude could fall to $20 per barrel by the time it’s all said and done.
The investment bank downgraded its oil forecast on Friday, saying the oil glut is proving to be far worse than forecast and shows no sign of fixing itself in the short or medium term.
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016,” the analysts wrote in a note to clients on Friday.
- Oil at $10? Don’t laugh, it’s happened before
- Don’t shed any tears for the part of Big Oil that’s making a killing
The bank now assumes that a barrel of West Texas Intermediate, the dominant North American oil blend, will average $45 through next year — down from $57 a barrel the last time the bank had a forecast.
Oil lost another $1.15 on Friday to close at $44.77, so a call to stay at that level for the next 18 months or so can’t be good news for oil companies
But the future could be even worse — that’s just the scenario the bank thinks is most likely.
There’s an outside chance the price could fall even lower because “while not our base case, the potential for oil prices to fall to such levels, which we estimate near $20 a barrel, is becoming greater as storage continues to fill,” the bank said.
Supply and demand imbalance
Goldman Sachs listed several reasons for their pessimism. It thinks OPEC isn’t as willing as some people believe to turn off the taps until prices rebound. Instead, OPEC seems to be increasing production, trying to rake in as much revenue as possible even if it means they are making less money for every barrel.
…click on the above link to read the rest of the article…
