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 […]

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By Vicky Ellis

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.