In a new note, Goldman Sachs analyst Jeff Currie takes his six-month price forecast for West Texas Intermediate crude oil to $US39 from $US75 in a radical new outlook on the price of crude oil.
The $US39 target is eye-catching, but Currie also takes his target on both Brent and WTI over the next 3, 6, and 12 months radically lower.
For WTI, Currie sees pricing falling to $US41, $US39, and $US65 over the next 3, 6, and 12 months, respectively. This is down from $US70, $US75, and $US80.
Currie sees Brent prices also falling sharply, to $US42, $US43, and $US70, down from a prior forecast of $US80, $US85, and $US90.
In slashing his forecast, Currie says the call was made, “To accommodate the substantial expected first half inventory build and using the storage arbitrage to the one-year ahead swap.”
Goldman has been titling its notes on the oil space, “The New Oil Order” for some time now, and the latest from Currie gives a new perspective on just what this might mean for the industry going forward.
“A new industry will likely be born out of this environment with lower costs driven not only by cost deflation in other commodities, currencies, rig rates and oil services but also by substantial productivity gains created by engineers facing tighter margins,” Currie writes. “Importantly, while shale is the marginal barrel today, we don’t believe it will represent the marginal project tomorrow. Now that shale has risen to be the dominant technology in an industry facing cost deflation, efficiency gains and margin compression, companies are entering a more risky environment.”
On Monday morning, WTI was hitting new lows.