TOKYO: Brent crude futures fell below $86 a barrel on Monday after Goldman Sachs cut its price forecasts for the contract and for US oil in the first quarter of next year by $15.
The US investment bank said in a research note on Sunday that it had cut its forecast for West Texas Intermediate to $75 a barrel from $90 and that for Brent to $85 from $100, with rising production in non-OPEC countries outside North America expected to outstrip demand.
The bank expects WTI to fall as low as $70 a barrel and Brent to hit $80 in the second quarter of 2015, when it expects oversupply to be most pronounced.
Goldman's projections contrast sharply with those of Standard Chartered Bank's oil analyst Paul Horsnell, known for having called the market's long rally a decade ago, who is sticking with a more bullish bias.
Last week, Horsnell and his team pared their forecast for 2015 Brent crude oil by $5 but only to $105 a barrel, still among the highest prediction around after a wave of reductions in bank forecasts over the past few weeks.
London Brent crude for December delivery was trading 19 cents lower at $85.94 a barrel at 0453 GMT. On Oct. 16 it had dropped below $83, its lowest in almost four years.
US crude for December delivery was up 8 cents at $81.09 a barrel. However, for the first time since January, US crude futures are poised to flip into contango, a structure in which prompt prices are below longer-dated contracts, typically signalling a weaker market.
The spread between December and January US oil futures fell as low as 24 cents on Monday, the same as Friday, which was the lowest since February.
Goldman's forecasts had an impact on the market even though some other researchers have already projected a slide in Brent and US oil to around $75 a barrel, said Ken Hasegawa, a commodity sales manager at Newedge Japan.
"The market is worried about further weakness as Goldman Sachs said, and doubts beget doubts as there are no indications of a clear sign of recovery in demand, while supplies are no doubt in excess," he said.
"It's not at the stage where participants could buy oil wholeheartedly believing it's a bargain now."
Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting, said: "The fall in prices despite continued easing of worries over the global economic recovery is likely to have been prompted by the Goldman Sachs forecasts ... I personally think prices have room for declines though not as steep as Goldman."
HIGH SUPPLIES The 12-member OPEC meets on Nov. 27 to consider adjusting its output target of 30 million barrels per day for the first half of 2015. So far only a minority of members have called for an output cut.
Saudi Arabia has previously sent signals it is comfortable with markedly lower oil prices and willing to maintain high supply levels to compete for market share.
Global oil supply remains high despite disruption in producers such as Iraq and Libya. Yemen resumed exports from its main oil pipeline on Saturday, a day after an attack by tribesmen temporarily halted flows, industry sources said.
Elsewhere, investors are looking to the Federal Reserve meeting on Tuesday and Wednesday for signs on when the US central bank could raise interest rates. The Fed is likely to conclude its bond purchases after recent data showed the US economy gaining strength.
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