27 October 2014 – Brent crude futures extended declines to below $86 a barrel on Monday after Goldman Sachs cut its price forecasts for the contract and for US oil by $15 in the first quarter of next year.
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 its prediction for Brent to $85 from $100, with rising production in non-Opec countries outside North America expected to outstrip demand.
London Brent crude for December delivery was trading 32 cents lower at $85.81 a barrel early on Monday, after settling down 70 cents on Friday. The front-month contract dropped to below $83 on 16 October, its lowest in almost four years.
US crude for December delivery was down 8 cents at $80.93 a barrel.
Goldman’s forecast had an impact on the market, though some other researchers have already projected Brent and US oil’s slide 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.”
Brent oil is expected to fall towards support at $82.87, as indicated by its wave pattern and a Fibonacci projection analysis, Reuters market analyst Wang Tao said on Monday.
The 12-member Opec meets on 27 November to consider adjusting its output target of 30 million barrels per day for the first half of 2015 and so far only a minority of members have called for an output cut.
Global oil supply remains high despite persistent geopolitical risks in producers such as Iraq and Libya.
Yemen resumed exports from its main oil pipeline on Saturday, one day after an attack by tribesmen temporarily halted flows, industry sources said.
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.
Elsewhere, investors are looking to the Federal Reserve meeting on Tuesday and Wednesday for signs on when the US central bank could lift interest rates. The Fed is likely to conclude its bond purchases in the face of recent upbeat data that showed the U.S. economy gaining strength.
The euro held firm in early Monday trade after the European Central Bank’s stress tests found smaller capital shortfalls among European banks than expected.