Posted on 10/27/2014 2:02:27 PM PDT by thackney
U.S. benchmark crude prices will fall to $70 per barrel next year, according to a new forecast published by Goldman Sachs Monday, suggesting that the recent and pronounced slide in oil prices isn’t a temporary phenomenon.
The decline is due to oil production growing at a faster pace than demand, leading to global oil market that’s oversupplied. The report called the change inevitable, noting that “getting to a point where the market shifted back into surplus was only a matter of time.”
The report predicts that West Texas Intermediate will fall to $70 per barrel in the second quarter of 2015, while Brent, the international crude standard, will fall to $80 per barrel during the same period.
WTI was trading at $81.02 per barrel Monday afternoon, while Brent was at $85.79.
Oil prices will be at their lowest points of 2015 during the second quarter. During the rest of 2015, the study predicts $75 WTI for the first quarter and second half of 2015 and $85 Brent.
In the longer-term — 2016 and beyond — it forecasts WTI at $80 and Brent at $90. That slight rebound of prices will occur when OPEC countries cuts their own production, once it’s clear that a slowdown in U.S. production growth has slowed as well.
Until recently, U.S. producers have benefited from oil inventories that remained relatively stable since mid-2012, as their shale production has coincided with disruptions among OPEC suppliers. At the same time, they’ve enjoyed growing global demand for crude.
Today, Goldman Sachs writes, that equilibrium is unraveling. U.S. production is strong but OPEC disruptions that has once faced Libya, Iran and Nigeria have eased. Global economic growth — and thus, demand for crude oil — has slowed.
As OPEC production has bounced back, core OPEC countries like Saudi Arabia aren’t expected to slow their output to keep prices high, as they might have in the past.
Still, the authors noted that the forecast could certainly change, in part because of questions about the price points at which various shale operations become unprofitable.
“The uncertainty around the required price to slowdown US shale oil production growth is a key risk to our updated price forecast,” Goldman Sachs wrote.
Obama will raise taxes on oil. Anything to kill the economy.
So far, the market players are betting on $79~80 for next year. But that might change in an hour or so. Or not.
What will happen to the price of oil if ISIS takes over the oil fields in Southern Iraq and Saudi Arabia?
If the production goes down by 85% like it has in the area ISIS now controls, global prices are going to skyrocket.
Interesting.
I get why you asked.
From what I read, that is their eventual goal.
They are solidifying their territorial gains to the north first.
I don’t think ISIS can overthrow Saudi Arabia, but I do think Iran can, and will attack in the near future.
The sustainable price is $80 a bbl. Lower than that it stifles production and exploration. Higher than that kills economies. Too low and it will cause a shift in usage from the eest to the east which will, upon correction, cause massive price instability on the upside. 80 is and should be the target.
I am not so sure about that. I have read that there may be a lot of ISIS sympathizers inside of Saudi Arabia. And the House of Saud is not very popular on the street.
But I do think that if ISIS gets south of Baghdad, Iran will move to protect Shia controlled territory (and oilfields) in southern Iraq.
Still doesn't come close to the $1.24/gal I paid when I moved here in 2003.
We’ve even got a few place dropping below $2.50/gal
http://www.houstongasprices.com/Houston/index.aspx
Paid $2.64 the other day. Gonna fill-ur-up in the morning, prolly find it even lower.
it will go as low as it has to to make pumping US crude unprofitable...
Low oil prices do not bode well for the survival of the house of Sauid. Money to support their huge social programs is what keeps them in power.
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