Goldman Sachs Group Inc cut its forecasts for Brent and West Texas Intermediate (WTI) crude prices next year on rising global supplies, predicting OPEC is set to lose influence over the oil market amid the US shale boom.
The bank is becoming more confident in the scale and sustainability of US shale oil production and said US benchmark prices need to decline to US$75 a barrel for a slowdown in output growth.
Brent is set to average US$85 a barrel in the first quarter, down from a previous forecast of US$100, and WTI is scheduled to sell for US$75 a barrel in the period, from an earlier estimate of US$90, analysts including Jeffrey Currie wrote in a report.
The biggest members of OPEC are discounting supplies to defend market share rather than cutting production to boost prices that have collapsed into a bear market.
The highest US output in almost 30 years is helping increase stockpiles as exporters including Saudi Arabia reduce prices to stimulate demand.
“We believe that OPEC will no longer act as the first-mover swing producer and that US shale oil output will be called upon to fill this role,” Goldman said in the report. “Our forecast also reflects the realization of a loss of pricing power by core OPEC [members].”
Any near-term OPEC production cut is set to be modest until there is sufficient evidence of a slowdown in US shale oil production growth, according to the report.
Global producers might need to cut almost 800,000 barrels a day of output next year to limit a build in inventories and ultimately balance the global oil market in 2016, Goldman said.
Accelerating non-OPEC production growth outside North America, including from Brazil, Mexico and Azerbaijan, would outpace demand growth, leaving the oil market oversupplied, according to the report.
The increased output is forcing producers to reduce prices to lure buyers.
State-owned Saudi Arabian Oil Co on Oct. 1 cut prices for all grades and to all regions for next month.
The Asian price of Arab Light was cut by US$1 a barrel to a discount of US$1.05 to the average of Oman and Dubai crudes, the benchmark published by Platts, the energy-information division of McGraw-Hill Cos — the lowest since December 2008.
“Core-OPEC [members] will not cut production significantly in coming months,” Goldman said in its report.
The drop in Saudi Arabian oil supply to markets last month reflects an increase in domestic stockpiles, and not a production cut, the bank said.
Nations from South Korea to India are benefiting from weak prices by seeking to diversify their crude suppliers.
India plans to seek US crude if the government eases a ban on domestic crude exports, Indian Oil Minister Dharmendra Pradhan said last week.
ConocoPhillips Co last month shipped its first cargo of Alaska North Slope crude to South Korea in eight years, making rare use of a Bill Clinton-era exemption to US oil export restrictions.
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