Over the past year, oil prices have been on a rollercoaster ride. At the beginning of this year, oil prices were around $100 a barrel and they have now dropped to $45 per barrel.
After a recovery back to around $60 per barrel during June, prices have plummeted again dropping to $45. However, oil could go even lower according to Goldman Sachs analysts, and it could drop as low as $20 per barrel soon.
According to Goldman Sachs, the reason for the fall is that there is a huge surplus of oil in the world, stemming from both buoyant supply and weaker demand, leaving prices at levels that have not been seen in decades.
‘The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016 on further OPEC production growth, resilient non-OPEC supply and slowing demand growth, with risks skewed to even weaker demand given China’s slowdown and its negative EM feedback loop. While not our base case, the potential for oil prices to fall to such levels, which we estimate near $20 per barrel, is becoming greater as storage continues to fill.’
-Economic Analyst at Goldman Sachs