Brace yourself for $40-per-barrel oil.
Bloomberg reports the U.S. benchmark crude price—down more than $60-per-barrel since June to just below $45 on Tuesday—is on the way to this next threshold, some on Wall Street are predicting.
“The markets are continuing to price in huge oversupply in the first half of 2015,” says Mike Wittner, a New York-based lead researcher for French multinational banking and financial services company Societe Generale SA. “We’re going to go below $40.”
Bank of America Corp. is also forecasting benchmark crude oil will dip below the $40 mark. And Goldman Sachs Group Inc. says that West Texas Intermediate needs to remain near $40 during the first half to deter investment in new supplies that would add to the glut.
Oil is seeking a “new equilibrium” as the Organization of Petroleum Exporting Countries abandons its role of keeping supply and demand aligned, according to Goldman. Prices are poised to drop further, testing the ability of U.S. shale drillers to keep pumping.
The U.S. benchmark has dropped 15% already this month, extending a 46% plunge last year that was the worst since the 2008 financial crisis.
The rout may continue to $35 a barrel in the “near term” because both oil supply and demand will have a delayed reaction to falling prices, Francisco Blanch, head of commodities research at Bank of America in New York, says in a report released last week. Read the full story.
