Experts at Goldman Sachs Group Inc. downgraded their two-year outlook for Brent and WTI crude. However, the worse-case scenario suggests the global oil surplus could be on such a massive scale, that it could push prices down as low as $20 a barrel. This scenario is possible if the glut persists amid OPEC production growth, resilient non-OPEC supply, and slowing demand expansion.
According to the recent consensus, in 2015 the European benchmark Brent is expected to reach $53.7 a barrel on average. So the forecast has been cut from $58.2 a barrel projected in May. Besides, West Texas Intermediate is likely to come out at $48.1 a barrel on average, which is also down from $52 in the previous forecast.
Goldman Sachs reduced its 2016 Brent crude prediction to $49.50 a barrel from $62 and trimmed its estimate for West Texas Intermediate to $45 a barrel from a May projection of $57.
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016,” Goldman Sachs analyst Damien Courvalin stated in the report. So the global oil oversupply made experts slash their estimates.
Nevertheless, analysts consider such a slump in crude prices to be short-lived. From their viewpoint, it will change the demand to supply ratio in the commodity market.
Importantly, despite a realistic chance of a nosedive to $20 a barrel, Goldman Sachs insists that it is the worse-case scenario and foresees different developments.
