Oil prices set to remain low for next three months, says Goldman Sachs

Oil prices are set to remain low for the foreseeable future, analysts at Goldman Sachs have warned.

Crude prices have been falling since last summer, as concerns over a global supply glut and shrinking global demand have weighed on the commodity and, despite a recent rebound, the trend looks set to continue.

“Prices need to stay low for longer to achieve a sufficient and sustainable slowdown in US production growth,” Goldman Sachs’ analysts said in a note, adding that crude will trade under $40 a barrel for the next three months.

The brokerage, however, added that there was a “modest upside” to its forecast, which means prices could be higher than expected.

Analysts said they expect prices to climb up to $65 a barrel in the first half of 2016, while they predicted that total oil production and stockpiles in the US could hit a new peak by the end of the month.

“While the build in US crude inventories has been unprecedented, our rig-based modelling of near-term US production points to production nearing a peak,” they said in the note.

“Combined with an expected ramp-up in refinery runs, we expect U.S. crude oil inventories to peak in April.”

In the week to 27 March, commercial crude-oil inventories rose 4.8m barrels to 471.4m, their highest level in almost 80 years, though data released from the US Energy Information Administration showed daily production had fallen by 36,000 barrels to 9.386m.

However, Goldman said the return of uncompleted wells coupled with a rig count that remained too high and increased output could weigh on oil prices in the short-term future.

“We expect that US production growth will remain too high in the second half of 2015 and 2016 at the current rig count and as a result of the constraint of the export ban,” analysts said.