The oil price could fall as low as $80 a barrel next year as the nascent global economic recovery fails to ignite demand in a world awash with crude.
Goldman Sachs cut its forecasts from $100 to $85 a barrel after a volatile period when Brent crude has fallen by more than 26 per cent over the past four months. Yesterday it was trading at $85.60.
The US investment bank said that Opec, the oil producers’ cartel that includes several Middle Eastern states, as well as Venezuela and Nigeria, was losing its power to influence the price of oil. Changes in the production of US shale oil will have a greater influence in the future, it said. Seth Kleinman, the head of energy strategy at Citigroup, agreed: “A long period of high price oil destroyed Opec. Prices were high enough for long enough that everyone in Opec produced as much as they could; that was the death of Opec.
“Now they are in a position they need to do something, it is not clear they have the organisational capacity to do it.”
He said that American producers would be the first to cut production as oil prices fall, because of the high price of extracting shale oil. As a result, they will likely drive prices. Opec is believed to be letting the oil price fall in the hope of forcing US shale producers out of the market.
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Goldman analysts said: “Any near-term Opec production cut will be modest until there is sufficient evidence of a slowdown in US shale oil production growth.”
Brent crude was trading at more than $115 a barrel in June and has fallen sharply since August. Goldman said that strong production outside the Opec countries, weak growth in demand, the return of production in Libya and undisrupted production in Russia and Iraq have all contributed to the slump.
It expects production outside Opec countries to accelerate, led by Brazil and drilling in the Gulf of Mexico, as extensive maintenance after the 2010 Deepwater Horizon disaster comes to an end. The growth in supply is expected to outpace growth in demand, leaving the global market oversupplied. The bank said that global economic growth would increase to 3.5 per cent next year, but there was a “risk that the historical relationship between global GDP growth and oil demand has weakened”, partly as a result of efficiency gains in energy consumption.
Mr Kleinman said: “Energy efficiency is proving transformative for all aspects of the energy industry. The US economy is doing well and electricity demand growth has been zero.”
Other oil analysts believe that prices could fall even farther. Michael Lewis, of Deutsche Bank, said that Brent crude could dip below $80 a barrel between now and the first quarter of next year.