Goldman Sachs lowered short-term oil price outlook sending oil price down

Analysts at Goldman Sachs lowered their three-month price forecast for Brent to $US42 a barrel from $US80. They set their forecast for US crude at $US41 ($49) a barrel, down from $US70, adding it would need to stay near $US40 for most of the first half of 2015 before it would hold up shale oil investments.

The U.S. is pumping oil at the fastest pace in more than three decades, helped by a shale boom that’s unlocked supplies from formations including the Eagle Ford in Texas and the Bakken in North Dakota. Prices slumped almost 50 percent last year as the Organization of Petroleum Exporting Countries resisted output cuts even amid a global surplus that Qatar estimates at 2 million barrels a day.

“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,” Goldman said in the report cited by Bloomberg. “The search for a new equilibrium in oil markets continues.”

West Texas Intermediate, the U.S. marker crude, will trade at $41 a barrel and global benchmark Brent at $42 in three months, the bank said. It had previously forecast WTI at $70 and Brent at $80 for the first quarter.

According to the report, the investment bank does not expect that Saudi Arabia or other core members of OPEC will cut production, versus its previous expectation that the group would help balance the oil market in the second half of 2015.

"This is anchored on our expectation that the slowdown in US shale oil production in second-half 2015 will be sufficient to clear the market overhang and the threat of capital being quickly redeployed to restart US production growth," it said.

The weakness across oil markets became evident last week when for the first time since 2009, the entire oil complex slipped into contango, a market structure where prices for immediate delivery is cheaper than for delivery in future months.

Oil won't return to $US100-a-barrel level 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 resource reported him as saying.