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Oil fell to the lowest level in more than 5-1/2 years after Goldman Sachs Group Inc and Societe Generale SA reduced their price forecasts and Venezuela called on Opec producers to work together to spur a rebound.
WTI will trade at $41 a barrel and Brent at $42 in three months, Goldman said in a report distributed on Monday, citing excess US storage capacity and predicting inventories will increase over the first half of this year. It also cut its price estimates for six and 12 months.
"To keep all capital sidelined and curtail investment in shale until the market has re-balanced, we believe prices need to stay lower for longer," said Goldman analysts including Jeffrey Currie in New York. "The search for a new equilibrium in oil markets continues."
Societe Generale reduced its average WTI price for this year to $51 a barrel from $65 in a January 9 report from Michael Wittner, the bank's New York-based head of oil research. Brent will average $55 a barrel in 2015, down from a previous estimate of $70.
West Texas Intermediate decreased as much as 4.7 per cent, and Brent 5 per cent, after dropping a seventh week. Crude has to "stay lower for longer" if investment in shale is to be curtailed to re-balance the global market, according to Goldman analysts. Prices need to return to $100 a barrel for economic equilibrium, Venezuelan President Nicolas Maduro said in Iran during a tour of West Asian Opec members.
"The price forecast cuts by both Goldman and Societe Generale reinforce the fears that have driven us down to these levels," Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. "We're hunting for a bottom, but it's anyone's guess where that will be."
Oil slumped almost 50 per cent last year, the most since the 2008 financial crisis, amid a supply glut estimated by Qatar at 2 million barrels a day. The Organization of Petroleum Exporting Countries is battling a US shale boom by resisting production cuts, signalling it's prepared to let prices fall to a level that slows American output that's surged to the highest level in more than three decades.
WTI for February delivery declined $2.08, or 4.3 per cent, to $46.28 a barrel at 10:13 am on the New York Mercantile Exchange. It touched $46.11, the lowest level since April 21, 2009. Total volume was 44 per cent above the 100-day average for the time of day.
Brent for February settlement dropped $2.29, or 4.6 per cent, to $47.82 a barrel on the London-based ICE Futures Europe exchange. The contract reached $47.61, the least since April 1, 2009. Volume for all futures traded was 52 per cent higher than the 100-day average. The European benchmark crude traded at a $1.54 premium to WTI, the least since October 16.
Rigs seeking oil in the US fell by 61 to 1,421, Baker Hughes Inc said January 9, extending the five-week decline to 154. It was the largest drop since February 1991, which also followed a slide in prices before the start of the Persian Gulf War.
"The week-to-week drop in the rig count was the biggest since the first Gulf War back in 1991," Stephen Schork, president of the Schork Group Inc in Villanova, Pennsylvania, said by phone. "This is a major change but we probably won't see lower output this year. We won't see the ramifications of this and the lessening of the glut until 2016."
Opec needs to reach a consensus with other producers to "converge at a common strategy to benefit the oil market and stabilise the global economy," Maduro said in comments broadcast on state television over the weekend.
The 12-member group decided to maintain its collective output target at 30 million barrels a day at a meeting on November 27. It's competing for market share amid surging output in the US, where production expanded to 9.14 million a day through December 12, Energy Information Administration data show. That was the most in weekly records that started in January 1983.
Oil won't return to $100 a barrel again, Saudi billionaire businessman Prince Alwaleed bin Talal said, according to USA Today. "If supply stays where it is, and demand remains weak, you'd better believe it is going to go down more," the newspaper reported him as saying.
Gasoline futures fell 4.22 cents, or 3.2 per cent, to $1.281 a gallon, after touching $1.2767, the lowest level since March 2009.
Ultra low sulfur diesel slipped 3.99 cents, or 2.3 per cent, to $1.6631. Diesel reached $1.6601, the lowest level since September 2009.
Regular gasoline at US pumps fell to the lowest level since May 2009. The average retail price slipped 0.9 cent to $2.13 a gallon on Sunday, according to Heathrow, Florida-based AAA, the nation's biggest motoring group. Pump prices were around $2.05 a gallon when oil was last below $50 a barrel.
