Goldman Sachs lowered its forecast for future oil prices this week, following the oil price’s recent slide.
It also said a price of $40 per barrel would be necessary for the next six months to stabilise out supply and demand.
In a research note from 11 January led by Goldman Sachs analyst Jeffrey Currie, it changed its long term assumption of what the oil price will be down from $90 per barrel to $70 per barrel.
The bank’s analysts also expect a “contango” situation – when prices to buy oil in advance are higher than the price will be at the time, known as the “spot” price.
As a result the bank forecasts the need for floating storage economics to balance an “oversupplied market”.
It reckons well-funded oil majors and national oil companies (NOCs) will scrap “high-cost, high complexity” projects and switch their attention to cheaper ones, through buying or merging with other projects.
In three months, Goldman forecasts a price for Brent crude oil of $42/bbl, in six months $43/bbl and in 12 months, $70/bbl.