Oil Slides As Forecasts Begin To Predict Long-term Lows

By Cassie Werber 

Oil fell on both sides of the Atlantic Monday, still hovering close to multi-year lows, as one major U.S. bank slashed its price forecasts for the first half of the coming year.

Goldman Sachs Monday said it was changing its oil forecasts for the first half of 2015, predicting a lower oil price in the medium-term.

The bank's Brent forecast is now $85 a barrel for the first two quarters of 2015, down from $100 a barrel previously. Its WTI crude oil forecast is now $75 for the first half, down from $90 a barrel.

They list several factors behind the change. "Accelerating non-OPEC production growth outside North America will outpace demand growth, leaving the oil market oversupplied," they said in a note to clients.

The scale and sustainability of U.S. shale oil production is making global oil cheaper, they added. Finally, they predicted that the Organization of the Petroleum Exporting Countries, which has hitherto held the balance of power in oil, being able to ramp up or slow down production to alter prices, "will no longer act as the first-mover swing producer."

Instead, U.S. shale oil output will be called upon to fill this role, the bank predicted.

The low oil price has been a boon to the beleaguered global economy, says David Hufton of brokerage PVM, acting "like a huge dose of QE," or monetary stimulus, he said, "although it is a transfer of spending power rather than a net global increase."

Mr. Hufton sees little relief, though, for oil prices. "Pessimism about prices remains widespread with every analyst cutting their price forecasts significantly through next year," he said.

Brent crude oil for December delivery is down 76 cents at $85.36 a barrel on ICE Futures Europe. WTI crude for delivery in December is down 28 cents at $80.73 a barrel on the New York Mercantile Exchange.

Recently ICE gasoil for delivery in November was down $3.00 at $732.50 a metric ton, while gasoline was down 164 points at $2.1260 a gallon.

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