Goldman Sachs has warned that the oil prices could fall down to as slow as $20 amid global over supply.
Brent North Sea crude for delivery in October shed $1.05 to stand at $47.98 a barrel on the London-based ICE Futures Europe exchange, down 3.9 per cent this week. The European benchmark crude traded at a premium of $3.18 to WTI.
Goldman Sachs’ warning comes as oil producers remain unmoved by the falling prices. Next year, OPEC will pump even more oil, led by increased production in Saudi Arabia, Iraq, and Iran. Shale oil companies in the United States have also been stubborn as prices have dropped, mainly because the cost of production is now so cheap.
As the prices fell from about $100 per barrel last year, the demand was string this year, but that trend won’t continue, Goldman said.
For the worldwide surplus to end by late 2016, U.S. producers will need to reduce output by 585,000 barrels a day and other non-OPEC production must fall by another 220,000 per day, the report said