It seemed like only yesterday — or 2014 — oil was selling for $100 a barrel.
But even as oil prices have plummeted to $45 a barrel, a report from Goldman Sachs forecasts it dropping even further, to as little as $20 a barrel by next year.
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016,” the New York-based investment bank said in a note to investors.
The report cites increased production from OPEC nations, ample supply from non-OPEC countries (such as the U.S. and Canada) and weaker demand from China’s slowing economy as reasons why oil could nosedive so low.
While the bank said such a price is not its base case, the possibility of $20 a barrel “is becoming greater as storage continues to fill.”
Goldman Sachs has readjusted its 2016 forecast from an average of $57 a barrel to $45.
The bank noted that while oil production has declined in the U.S. over the past year, it hasn’t been enough to offset ramped up production among OPEC nations.
This has created an oversupply in the market that could drive oil as low as $20 as the bank predicts Saudi Arabia, Iraq and Iran will boost production further even as the U.S., Canada and Russia slows down.
