Goldman Sachs has slashed its 2015 oil price forecasts, making it the most bearish among major financial institutions, adding pressure to crude futures that have already tanked near 25 percent over the past five months.
The US investment bank said rising production will outstrip demand, joining other oil analysts who predict consumption will be dented by slower global economic growth and lead to a supply glut.
In its report, Goldman analysts said that they expect US benchmark West Texas Intermediate (WTI)crude to fall to $75 a barrel and Brent to $85 a barrel in the first quarter of 2015, both down $15 from their previous forecast.
WTI could fall as low as $70 in the second quarter and Brent as low as $80, when oversupply would be the most pronounced, before returning to first-quarter levels, Goldman said.
Goldman is known for its bold oil price calls. In May 2011, with Brent oil prices around $115, Goldman said that oil could rise to $130 within a year, and they very nearly did for a brief period in March 2012.
In 2008, with oil prices on the rise above $100, Goldman said prices could spike as high as $200. Oil did reach near $150 that July, but within months had begun a relentless credit crisis-driven dive to below $40 by the end of the year.
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Goldman said production outside OPEC countries was expected to accelerate, led by Brazil and drilling in the Gulf of Mexico with the end of extensive deep-water maintenance following the 2010 Macondo disaster.
Among OPEC countries, Iraqi production is seen increasing by 200,000 bpd and Libya’s output stabilising at about 700,000 bpd, compared with recent production of about 900,000 bpd.
Iranian production and exports are unlikely to see further growth because Goldman analysts do not expect a resolution to the country’s nuclear dispute with the West by the Nov. 24 deadline, meaning sanctions on Tehran will not be lifted.
On the demand side, growth has only averaged 630,000 bpd year-on-year so far, less than half Goldman’s initial forecast for 2014, the report said.
Global economic growth is forecast by Goldman analysts to increase to 3.5 percent next year but there is a “risk that the historical relationship between global GDP growth and oil demand has weakened,” the report said.
In the United States, rising shale production is increasingly affecting global energy flows and eroding OPEC’s pricing power, Goldman said.
Once prices fall and US production slows, Goldman expects cutbacks among OPEC producers including Saudi Arabia, which has been content to let prices fall in the hope of forcing US shale producers out of the market.
