Wave of reductions in bank forecasts
Brent crude futures fell below $86 a barrel on Monday after Goldman Sachs cut its price forecasts for the contract and for US oil in the first quarter of next year by $15.
The US investment bank said in a research note on Sunday that it had cut its forecast for West Texas Intermediate (WTI) to $75 a barrel from $90 and that for Brent to $85 from $100, with rising production in non-Organisation of Petroleum Exporting Countries (Opec) members outside North America expected to outstrip demand.
The bank expected WTI to fall as low as $70 a barrel and Brent to hit $80 in the second quarter of 2015, when it expected oversupply to be most pronounced.
Goldman’s projections contrast sharply with those of Standard Chartered Bank oil analyst Paul Horsnell, known for having called the market’s long rally a decade ago, who is sticking with a more bullish bias.
Last week, Mr Horsnell and his team pared their forecast for 2015 Brent crude oil by $5 but only to $105 a barrel, still among the highest prediction around after a wave of reductions in bank forecasts over the past few weeks.
London Brent crude for December delivery was trading 19c lower at $85.94 a barrel at 4.53am GMT. On October 16 it had dropped below $83, its lowest in almost four years.
US crude for December delivery was up 8c at $81.09 a barrel. However, for the first time since January, US crude futures are poised to flip into contango, a structure in which prompt prices are below longer-dated contracts, typically signalling a weaker market.