Goldman Sachs, the global commercial bank, has warned that the price of crude oil could come under increased pressure from a combination of bearish market sentiment and mounting pessimism over the growth of demand, before it can begin to rebound from recent losses.
Arjun Murti, the Goldman Sachs analyst who predicted the “super spike” above $100 a barrel, back in March 2005, said that a sustained rally in oil prices was highly unlikely.
"Oil prices increasingly appear unlikely to sustain a rally until global GDP expectations bottom.
"While we believe oil supply/demand fundamentals are not as bearish as is sentiment, we recognize that concern continues to mount towards global oil demand growth," said the New York-based Murti.
Murti and other equity energy analysts, which head up Americas equity energy research, said that stunted economic growth across the globe and technical selling pressure has made Goldman Sachs $120 a barrel price forecast for the fourth quarter vulnerable to "downside" risk.
Murti has previously predicted that a ‘super spike’ would strike again with prices jumping as high as between $150 to $200 by the end of 2009, as supply struggles to keep place with escalating demand.
Since this time the group has had its arms tied, and been forced to slash its 2009 outlook by more than 20%, down to as low as $110 a barrel.
Meanwhile, a team of Goldman commodity research analysts led by Jeffrey Currie in London forecast prices to average $123 a barrel next year.
Goldman Sachs, who is by far the most active in commodity markets, is not the only bank who has been bullied into slashing its oil price forecasts following the continued slump of futures contracts since July 11.
Oil has fallen more than 37% since its peak; a move that has forced the hand of OPEC President, Chakib Khelil, to forward and say that the Organisation too, expects prices to continue to decline. Mr. Khelil also stated that the cartel would rigidly stick to its production quotas so not to escalate the situation any further.
The global credit crises has only helped to exacerbated the selloff in oil prices as the major financial players have been backed into a corner and forced to liquidate their positions.
"While the market may be incorrectly interpreting the selling pressure as entirely indicative of weakening global oil demand growth, the distinction does not become relevant until the credit crisis moderates and global economic growth stabilizes," said the commerical bank.