London: U.S. bank Goldman Sachs slashed it 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 percent to below USD 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 USD 30s a barrel before the market saw a rebound.
Goldman Sachs is one of the most influential U.S. banks in commodities markets. In 2008, when oil prices were racing up towards their all-time high at almost USD 150 a barrel, the bank forecast crude could hit USD 200.
The bank said on Monday it had cut its 2015 forecast for Brent to USD 50.40 a barrel from USD 83.75 and reduced its 2015 WTI price forecast to USD 47.15 per barrel from USD 73.75.
For 2016, Goldman Sachs sees Brent at USD 70 and WTI at USD 65, down from USD 90 and USD 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 USD 42, USD 43 and USD 70 respectively, from USD 80, USD 85 and USD 90," the bank said in a report to clients.
WTI 3-, 6- and 12-month price forecasts have been cut to USD 41, USD 39 and USD 65 from USD 70, USD 75 and USD 80 a barrel.
"While history would suggest that a storage blow-out would push spot prices below USD 35, we believe that by avoiding breaching storage capacity, the market will hover around USD 40, potentially dipping at times into the high USD 30s which we see as the likely lows of this cycle," the report said.
