Goldman Sachs Expects Oil Prices to Fall Further as OPEC Stands Pat

Goldman Sachs sees further weakness for oil due to the worsening of already weak fundamentals after OPEC held back from cutting production at its recent meeting.

The investment bank is standing by its prediction of $20 a barrel bottom—the breakeven cash cost for highly levered high-cost US shale producers. If oil prices fall below that level, companies will have to make output cuts in order to avert losses.

Even though global oil stock will remain below storage capacity, Goldman said the rebalancing is “far from achieved” as U.S. rig count and exploration and production guidance are “too high” to achieve the required supply decline.

OPEC is also likely to pump aggressively toward the high-end of Goldman’s 32-million-barrel a day forecast as Iran resumes productions after U.S. sanctions are lifted over the next few months.

Oil storage also runs the risk of hitting constraints by next spring.

CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam

Latest posts by Craig Erlam (see all)