If you thought the oil price would rally any time soon, TheGoldman Sachs Group, Inc. (NYSE:GS) would like to have a word.The investment banking giant reported on the oil price forecast on Friday, concluding that before the dust settles, the oil price might go as low as $20.00 per barrel. (Source:
CBC, last accessed September 11, 2015.) It joins Citigroup Inc. (NYSE:C), which recently warned of crude slipping below $30.00 per barrel. (Source:
Bloomberg, last accessed September 11, 2015.)The reason for this negative forecast is that the global oversupply of crude oil is showing itself to be worse than anyone expected. Emerging data shows that we won’t be facing any relief from currently rising oil stockpiles or surging production. (Source:
IEA, last accessed September 11, 2015.)Indeed, analysts are now expecting this production surplus to continue throughout this year and into 2016. (Source:
Globe and Mail, last accessed September 11, 2015.)Goldman Sachs is now banking on the price of West Texas intermediate (WTI) to average about $45.00 per barrel through 2016, an astounding downgrade in its original forecast of $57.00 per barrel. (Source:
Reuters, last accessed September 11, 2015.)While this is the average projected, the chance of crude oil declining to just $20.00 has not been ruled out, according to the bank.This negative oil price forecast is due to several interrelated issues.OPEC is the primary culprit, continuing its record-high production levels in an effort to starve out non-OPEC market competitors. As prices have fallen, Saudi Arabia has followed a strategy of ramping up oil extraction in an effort to partially offset revenue losses.Sponsored Content:
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