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IEA SEES LOWER SUPPLY

Goldman warns oil may drop to $20

NEW YORK, September 12, 2015

Citing "operational stress" as a growing downside risk, influential Wall Street trader Goldman Sachs said on Friday that the risk that oil could fall as low as $20 a barrel is rising, cutting its forecasts again.

“While not our base case, the potential for oil prices to fall to such levels ... is becoming greater as storage continues to fill, the firm said in a note entitled "Lower for even longer".

Crude futures fell on Friday after Goldman cut its oil price outlook, then pared losses after a report showed a drop in the US oil rig count.

Goldman lowered its 2016 forecast for US crude to $45 a barrel from $57 previously, and Brent to $49.50 from $62, citing oversupply and concerns over China's economy.

Germany's Commerzbank also cut its oil price outlook on Friday, joining a long list of banks that have downgraded their crude price projections on concerns over a supply glut.

"The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016," Goldman said.

US crude futures' front-month contract was down 80 cents, or 1.7 per cent, at $45.12 a barrel by 1:20 p.m. EDT (1720 GMT).

The front-month in Brent, the global benchmark for oil, was off 30 cents, or 0.6 per cent, at $48.59.

Both crude benchmarks fell about 3 per cent, then pared losses after a recovery in Wall Street share prices and news of the lower rig count.

US stocks bounced off session lows ahead of a Federal Reserve meeting next week that will decide whether to raise US interest rates. Equity markets have provided direction to oil since the end of August as investors grappled with mixed fundamentals for crude.

Oil services firm Baker Hughes said US drillers idled 10 rigs this week, cutting activity for a second week in a row in sign that price declines were discouraging producers.

Crude prices have more than halved over the past year, with Brent tumbling from nearly $120 a barrel in the middle of 2014 to below $43 last month. Prices collapsed as a global glut of crude pushed commercial and government inventories to all-time highs.

Analysts say the market is rebalancing, but high stocks will keep weighing on prices into next year.

Investors shrugged off a report from the Paris-based International Energy Agency, which suggested that Opec was successfully defending market share by keeping output steady in the face of lower prices. – Reuters




Tags: Opec | Brent | Goldman Sachs | oil price |

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