Goldman Sachs Group Inc. cut its forecast for the average price of New York-traded crude oil in 2009 to $80 a barrel from $86, adding that it was closing all its trading recommendations for oil.
“Poor credit conditions and their negative implications for economic activity will continue to pressure WTI crude prices,” Goldman analysts led by Jeffrey Currie said in a report dated yesterday. “Over the past week, macroeconomic data confirmed the severity of recent economic weakness, reinforcing the concerns flagged by extremely weak physical commodities markets.”
A price average of $50 a barrel for most of next year is possible if economic and industrial activity in Asia fails to stabilize, the weekly report said. With this latest revision the bank has cut its 2009 outlook 46 percent since September.
“Although the worst of the commodity demand weakness in OECD economies is likely already behind us, the outlook for non- OECD demand is more uncertain,” the report added. “We are closing all of our oil trading recommendations.”
The report closed four oil-related recommendations. These involved trading the price difference gasoline and crude, a three-way transaction using crude options, buying crude swap contracts for 2012, and trading the difference between 2008 and 2013 futures.
This last recommendation was running a loss of $40.88 a barrel, according to the report.
The bank lowered its old demand growth forecast for next year to 100,000 barrels a day, from 300,000 barrels a day. It also cut estimates for supply expansion outside the Organization of Petroleum Exporting Countries by 50 percent to 200,000 barrels a day, because of slower production recovery in the Gulf of Mexico and Azerbaijan.
Until a Sept. 16 report, Goldman had projected an average of $148 a barrel for West Texas Intermediate crude next year, the highest at that time among 35 analyst estimates compiled by Bloomberg.
Goldman said its year-end target of $107 a barrel for 2009 was unchanged by the revision to the annual average outlook. The bank has a three-month price target of $59 a barrel, six-month of $70 and 12-month of $102 a barrel.