Oil Price Forecast Lowered by Goldman Sachs

After the deepening of the financial crisis, Goldman Sachs Group Inc. lowered its crude oil price forecasts for a second time this year.

Goldman reduced its estimate for the U.S. benchmark West Texas Intermediate crude for the fourth quarter to $75 a barrel from $110, and cut its year-end target to $70 a barrel from $115, Goldman's research analysts led by Jeffrey Currie and Giovanni Serio said in a report today.

“We clearly underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand,” the analysts wrote in the report.

Global oil demand has declined as a financial crisis in the U.S., the world's biggest energy consumer, spread after banks including Lehman Brothers Inc. collapsed. Banks pinched by the credit squeeze have tightened lending as growth slows, tipping the world economy close to a recession.

Goldman lowered their forecasts for 2009, with the average for the year reduced to $86 a barrel from $123. The bank's end- 2009 target was cut to $107 a barrel from $125. The latest forecast is Goldman's second downward revision this year, after a cut on Sept. 16.

New York crude oil has fallen 45 percent from a record $147.27 a barrel in New York on July 11 as demand deteriorated and the weaker outlook in Europe and Asia lifted the dollar, reducing the appeal of commodities priced in the U.S. currency.

The “point of maximum weakness for oil demand is likely occurring right now while the credit markets are locked,” the Goldman analysts said.

Author: Jo Amey