Brent Crude Falls Below $50 On Nagging Oversupply Fears

LONDON--Oil prices started the week deep in the red, falling to fresh 5 1/2 year lows as analysts took an even more bearish outlook on crude.

Over the weekend, Goldman Sachs and Société Générale joined the list of analysts who have slashed their oil-price forecasts projecting that crude's dramatic slide since last summer could continue well into 2015.

Crude futures have fallen more than 50% since a peak in June on the back of strong global supply and lackluster demand.

Brent crude for February delivery on London's ICE Futures exchange fell 2.5% to $48.86 a barrel, trading near its lowest levels since April 2009. On the New York Mercantile Exchange, front-month WTI futures shed 2.3% to trade at $47.25, after losing 8.2% last week.

"The search for a new equilibrium continues," Jeffrey Currie, head of commodities research at Goldman Sachs, said in a report.

Goldman Sachs lowered its average Brent crude forecast for 2015 to $50.40 a barrel from $83.75, and its WTI oil forecast to $47.15 a barrel from $73.75.

Oil prices will now have to remain lower for longer to choke off the capital supply that sustains U.S. shale production, creating a more U-shaped type of recovery, Mr. Currie said.

Keeping prices low plays into the strategy of Gulf producers like Saudi Arabia who "will keep the thumbscrews on U.S. shale producers," said Michael Hewson of CMC Markets.

"That suggests to me that $40 a barrel is feasible over the next few months," Mr. Hewson said.

Société Générale also cut its Brent price forecast by $15 to average $55 a barrel in 2015 and for WTI crude by $14 to $51 a barrel, due to the buildup in oil storage and inventories in the first half of this year.

"The economic conditions that the oil markets face have just not changed, and are unlikely to change soon," said Jameel Ahmad, chief market analyst at FXTM. "The overpowering supply and demand equation is heavily-weighted in favor of the bears, which is allowing them to continually block the bulls from making any countermoves."

Consumers, however, are benefiting from the bearish sentiment as low gas prices act as an economic stimulus for oil importing nations.

"The fall in oil provides more of a boost than all the central bank's actions over the last five years because it has found its way directly into the pockets of consumers," Mr. Hewson.

Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--fell more than 1% to $1.3070 a gallon, while ICE gas oil for January changed hands at $468.25 a metric ton, down a dollar from Friday's settlement.

Eric Yep and Alistair MacDonald contributed to this article.

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