Tuesday 13 January 2015

Goldman revises down its oil forecast

Goldman revises down its oil forecast

Goldman Sachs lowered its forecast for future oil prices this week, following the oil price’s recent slide.

It also said a price of $40 per barrel would be necessary for the next six months to stabilise out supply and demand.

In a research note from 11 January led by Goldman Sachs analyst Jeffrey Currie, it changed its long term assumption of what the oil price will be down from $90 per barrel to $70 per barrel.

The bank’s analysts also expect a “contango” situation – when prices to buy oil in advance are higher than the price will be at the time, known as the “spot” price.

As a result the bank forecasts the need for floating storage economics to balance an “oversupplied market”.

It reckons well-funded oil majors and national oil companies (NOCs) will scrap “high-cost, high complexity” projects and switch their attention to cheaper ones, through buying or merging with other projects.

In three months, Goldman forecasts a price for Brent crude oil of $42/bbl, in six months $43/bbl and in 12 months, $70/bbl.

Written by

Bruna Pinhoni

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